Agency conflicts that exist in the real world mean that

Question

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Agency conflicts arise due to a divergence of interests between shareholders and managers, who are supposed to act as agents for the shareholders. In such situations, managers may prioritize their own interests over those of shareholders or bondholders, depending on which benefits them more. Therefore, the correct choice is A. Agency conflicts arise because managers have different interests and incentives than other stakeholders in the firm, such as shareholders and bondholders. In some cases, managers may make decisions that benefit themselves at the expense of shareholders or bondholders, depending on which group they perceive as more important to their own career success or financial well-being. Therefore, option A is the best answer as it acknowledges the complex and dynamic nature of agency conflicts in the real world. Option B is incorrect because it assumes that managers always act in the best interests of the firm, which may not be the case in reality. Option C is also incorrect because it suggests that managers will always prioritize the interests of bondholders over shareholders, which may not be true in all situations. Option D is incorrect because it assumes that shareholders always have the voting power to influence managerial decisions, which may not be the case in all types of firms.

Agency Conflicts That Exist in the Real World Mean That