Which of the following is not an agency cost?
A) Flying an executive overseas without a genuine business purpose for doing so.
B) Paying more than the actual market value to purchase a competitor.
C) Low-interest loans to corporate executives.
D) Protecting management jobs which could effectively be eliminated.
E) Interest paid on long-term corporate borrowing.

Question

Quizplus · Accepted Answer

Agency costs are internal costs incurred due to the conflicts of interest between shareholders and management. These include costs like excessive executive compensation or wasteful spending that doesn't benefit shareholders. Interest paid on long-term corporate borrowing, however, is a financing cost, not an agency cost, as it does not arise from conflicts of interest within the company.

Which of the Following Is Not an Agency Cost