The highest agency costs in U.S. companies are thought to be due to

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Empire building refers to managers pursuing growth and expansion initiatives that may benefit their own interests rather than those of shareholders. This can lead to excessive spending, which increases agency costs. While fraud, insider trading, and earnings manipulation can also increase agency costs, they are not typically as significant as empire building. Empire building refers to managers' tendency to expand their departments or divisions beyond what is necessary in order to increase their own power and prestige, often at the expense of the company's profitability. This behavior leads to higher agency costs since it diverges from the goal of maximizing shareholder value. Fraud, insider trading, and earnings manipulation can also create agency costs, but they are not as pervasive as empire building in U.S. companies.

The Highest Agency Costs in U