The agency costs of an MNC are likely to be lower if it:
A) scatters its subsidiaries across many foreign countries.
B) increases its volume of international business.
C) uses a centralized management style.
D) scatters its subsidiaries across many foreign countries AND increases its volume of international business.

Question

Quizplus · Accepted Answer

Using a centralized management style allows for better control and coordination of operations across subsidiaries, reducing the risk of agency costs such as duplication of efforts or conflicting strategies. Scattering subsidiaries across many countries increases the complexity of managing them, potentially leading to higher agency costs. Increasing the volume of international business may also lead to higher agency costs if not properly managed, such as conflict of interest among different subsidiaries. Therefore, the best choice is using a centralized management style to minimize agency costs.

The Agency Costs of an MNC Are Likely to Be