Which of the following statements is not derived from the agency theory?
A) Entities employ managers to conduct business on their behalf and to negotiate contracts with other parties.
B) An entity is the centre of contractual relationships, with different parties having rights and responsibilities under the contracts.
C) Managers will not always act in the best interest of shareholders.
D) There are costs incurred in order to control agent's behaviour.

Question

Quizplus · Accepted Answer

This statement is not derived from agency theory as it is a general observation of contractual relationships, rather than a specific concept within agency theory. The other three statements are all key concepts of agency theory, which examines the relationship between principals (entities) and their agents (managers) and the potential for conflicts of interest between them.

Which of the Following Statements Is Not Derived from the Agency