Implicit agency costs:
A) will not harm shareholders
B) have a direct expense associated with them
C) may include restrictive covenants
D) include cost of goods sold

Question

Quizplus · Accepted Answer

Implicit agency costs refer to costs that are not directly observable or measurable, such as the potential loss of value due to conflicts of interest or shirking by managers. These costs are not typically reflected in financial statements and may include things like restrictive covenants, which are agreements that limit the actions of managers in order to protect shareholder interests. Options A, B, and D are incorrect as they do not accurately reflect implicit agency costs.

Implicit Agency Costs