What are agency costs?
A)Costs of the sales force
B)Costs associated with slack effort and with the administrative controls to deter it
C)Costs related to general and administrative expenses
D)Costs associated with outsourcing of firm functions
E)Costs attributed to the use of professional service firms

Question

Quizplus · Accepted Answer

Agency costs are costs that arise from the conflict of interest between the principal (shareholders) and the agent (managers). These costs include the costs associated with slack effort (when managers do not exert enough effort to maximize shareholder wealth) and costs associated with the administrative controls (such as incentive plans and monitoring devices) to deter slack effort.

What Are Agency Costs