The agency problem can be avoided if
A)the firm is not subject to regulation by a government agency.
B)the manager and owner can manipulate reported profit.
C)the firm has positive profits.
D)the goals of the owner and manager are aligned.

Question

Quizplus · Accepted Answer

The agency problem arises when the goals of the principal (owner) and the agent (manager) are not aligned. Therefore, if the goals of the owner and manager are aligned, the agency problem can be avoided. This can be achieved through various mechanisms such as performance-based compensation, ownership stake, transparency and communication, etc.

The Agency Problem Can Be Avoided If