The best definition of agency problem is:
A) The possibility of conflicts between shareholders and management in a large corporation.
B) The process of planning and managing a firm's long-term investments.
C) Determining the optimal mix of internal and external board of directors.
D) The purchase or sale of securities whose value derives from the price of another, underlying, asset.
E) Determining who should be the agent of corporate executives.

Question

Quizplus · Accepted Answer

The agency problem arises due to conflicts of interest between the principals (shareholders) and agents (management) in a corporation, where the management may not always act in the best interests of the shareholders.

The Best Definition of Agency Problem Is