Agency costs refer to the costs associated with the conflict of interest between the management (agents) and the shareholders (principals) of a company. These costs can arise from the need to monitor management actions, the implementation of incentive structures, and the potential for management to act in their own interests rather than those of the shareholders.

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Agency Costs Are

Question 82

Multiple Choice

Agency costs are:

A) The total dividends paid to shareholders over the lifetime of the firm.
B) The costs that result from default and bankruptcy of the firm.
C) Corporate income subject to double taxation.
D) The costs of the conflict of interest between stockholders and management.
E) The total interest paid to creditors over the lifetime of the firm.

Correct Answer: