Despite the existence of governance mechanisms and comprehensive measurement and control systems, a degree of information asymmetry will always remain between principles and agents.

Question

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Information asymmetry refers to the situation where one party in a transaction has more or better information than the other. While governance mechanisms and measurement and control systems may help reduce information asymmetry, it cannot be completely eliminated. Therefore, a degree of information asymmetry will always remain between principles (e.g. shareholders) and agents (e.g. managers).

Despite the Existence of Governance Mechanisms and Comprehensive Measurement and Control