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 refers to the potential for conflicts between shareholders (principals) and management (agents) in a large corporation, where agents may place their interests above those of the principals they serve. This can lead to an inefficient allocation of resources and reduce shareholder value.

The Best Deﬁnition of Agency Problem Is