RAROC and EVA can reduce agency costs.

Name: RAROC and EVA can reduce agency costs.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

RAROC (Risk-Adjusted Return on Capital) and EVA (Economic Value Added) are financial metrics that help align the interests of managers with those of shareholders, thereby reducing agency costs. RAROC ensures that the risks taken are adequately compensated by returns, while EVA focuses on generating value beyond the cost of capital, encouraging decisions that enhance shareholder value.

RAROC and EVA Can Reduce Agency Costs