Positive accounting theory suggests that the separation of ownership and control within an entity means managers, as agents, are likely to act:
A) in their own interests.
B) in the interests of the debtholders.
C) in the interests of the shareholders.
D) in the interests of the directors.

Question

Quizplus · Accepted Answer

Positive accounting theory suggests that managers, as agents, are likely to act in their own interests, which may conflict with the interests of the shareholders. This is because managers may have different goals and motivations than the shareholders, such as maximizing their own salaries or job security. The separation of ownership and control creates a principal-agent problem, which is addressed through various mechanisms such as performance-based incentives and monitoring by the board of directors.

Positive Accounting Theory Suggests That the Separation of Ownership and Control