Agency costs include all of the following EXCEPT
A) management reports to stockholders.
B) the cost of monitoring management behavior.
C) purchasing insurance against management misconduct.
D) performance incentives paid to managers.

Question

Quizplus · Accepted Answer

Agency costs include the costs associated with monitoring management behavior (B), purchasing insurance against management misconduct (C), and providing performance incentives to managers (D). However, management reporting to stockholders (A) is not considered an agency cost as it is an expected and necessary element of corporate governance.

Agency Costs Include All of the Following EXCEPT