According to agency theory,the firm is viewed as a(n):
A)unified,profit-maximizing entity.
B)task force organization that must respond to rapidly changing environments.
C)entrepreneurial endeavor.
D)"nexus of contracts" among self-interested individuals.
E)entrepreneurial structure.

Question

Quizplus · Accepted Answer

According to agency theory, the firm is seen as a "nexus of contracts" among self-interested individuals, such as shareholders, managers, employees, and creditors. These individuals have different goals and requirements and hire each other to perform specific tasks, hence forming a contractual relationship. The agency theory explains how conflicts arise between the principal (shareholders) and the agent (managers) and how monitoring and incentive mechanisms can be used to align their interests.

According to Agency Theory,the Firm Is Viewed as A(n)