Maria is a manager for Silverman Racks investment bank.She decides one day to give herself a hefty $250 000 bonus,which will directly reduce the value of each share in the company.Since she only owns 5% of the total shares,she sees a net benefit because she is able to enjoy the entire $250 000 herself.This is an example of what type of cost?

Question

Quizplus · Accepted Answer

This is an example of agency costs, as Maria, as a manager, is acting in her own self-interest rather than in the interest of the shareholders as a whole. She is using her position of power to benefit herself at the expense of the other shareholders.

Maria Is a Manager for Silverman Racks Investment Bank