In corporations, agency theory is used to explain the relationship between stockholders and corporate managers, and between upper-level managers and the lower-level managers they supervise.

Question

Quizplus · Accepted Answer

Agency theory is indeed used to explain the relationship between stockholders and corporate managers, as well as between upper-level and lower-level managers. Its main focus is on the potential conflicts of interest that can arise due to differences in goals, information, and incentives between these different parties.

In Corporations, Agency Theory Is Used to Explain the Relationship