Which of the following statements concerning "agency problems" is most correct?
A)Regardless of economic conditions, if a firm's stock price falls during the year, this indicates that the firm's managers must not be acting in the best interests of the shareholders.
B)One method of controlling agency problems is to engage in the taking of "poison pills."
C)One of the best means to control agency problems is to require the managers and other important decision makers of the firm to also be owners of the firm.
D)Agency problems probably would not exist if the important decisions of a firm were made by persons who have no vested interests, such as ownership, in the firm.
E)None of the above is a correct statement.

Question

Quizplus · Accepted Answer

Requiring managers and important decision makers to be owners of the firm aligns their interests with those of the shareholders, reducing the likelihood of agency problems. The other options are either incorrect (A is a sweeping statement, B is a controversial method with mixed results, and D is unrealistic) or too broad/general to be considered the "most correct" statement.

Which of the Following Statements Concerning "Agency Problems" Is Most