A corporation may incur agency costs because

Question

Quizplus · Accepted Answer

All of the responses are correct. Agency costs arise due to the separation of ownership and management in a company. Managers may not always act in the best interests of shareholders, resulting in agency costs. Shareholders also incur monitoring costs to ensure that managers act in the best interests of the company. Hence, option A and B are correct. Overall, the separation of ownership and management, combined with the inherent misalignment of incentives, results in agency costs.

A Corporation May Incur Agency Costs Because