Which of the following refers to the possibility that a firm's owners or managers will take actions contrary to the promises contained in the covenants of the securities the firm issues to raise funds?

Question

Quizplus · Accepted Answer

Agency costs refer to the costs associated with the conflict of interest between the owners (principals) and the managers (agents) of a firm. This includes the risk that managers may act in their own interests rather than in the interests of the shareholders, potentially violating the terms or spirit of the covenants of securities issued by the firm.

Which of the Following Refers to the Possibility That a Firm's