Agency costs faced by MNCs may be larger than those faced by purely domestic firms because:
A) monitoring of managers located in foreign countries is more difficult.
B) foreign subsidiary managers raised in different cultures may not follow uniform goals.
C) MNCs are relatively large.
D) All of these are correct.
E) monitoring of managers located in foreign countries is more difficult AND foreign subsidiary managers raised in different cultures may not follow uniform goals.

Question

Quizplus · Accepted Answer

All of the options are valid reasons for why agency costs faced by MNCs may be larger than those faced by purely domestic firms. Monitoring managers located in foreign countries is inherently more difficult due to language barriers, time zone differences, and cultural differences. Additionally, managers of foreign subsidiaries may have different cultural backgrounds and incentives, which could create conflicts with the overall goals of the MNCs. Finally, MNCs are typically larger than domestic firms, which also creates challenges in monitoring and coordination.

Agency Costs Faced by MNCs May Be Larger Than Those