$\underline{\text{ Agency problems }}$ and $\underline{\text{ costs }}$ are incurred whenever the owners of a firm delegate decision-making authority to management.

Question

$\underline{\text{ Agency problems }}$  and $\underline{\text{ costs }}$  are incurred whenever the owners of a firm delegate decision-making authority to management.

Quizplus · Accepted Answer

Agency problems and costs arise when the interests of the managers (agents) do not align with those of the shareholders (principals), resulting in conflicts of interest and potentially negative outcomes for the firm. This delegation of decision-making authority can create various costs, such as monitoring and auditing costs, and may require the implementation of various mechanisms to align incentives and mitigate potential agency problems, such as performance-based compensation and board of director oversight.

Agency problems ‾\underline{\text{ Agency problems }} Agency problems ​ And costs ‾\underline{\text{ costs }} costs ​ Are Incurred Whenever the Owners of a Firm Delegate Decision-Making

$\underline{\text{ Agency problems }}$ And $\underline{\text{ costs }}$ Are Incurred Whenever the Owners of a Firm Delegate Decision-Making