Costs associated with the conflicts of interest between the managers and the shareholders of a corporation are called:
A)legal costs.
B)bankruptcy costs.
C)administrative costs.
D)agency costs.

Question

Quizplus · Accepted Answer

The costs associated with conflicts of interest between managers and shareholders of a corporation are called agency costs. These costs arise because the managers may act in their own self-interest instead of maximizing shareholder value, and they could misuse the resources of the corporation. Consequently, shareholders suffer losses or lower returns on their investment.

Costs Associated with the Conflicts of Interest Between the Managers