Agency cost occurs when managers or directors take actions adverse to shareholders' interest.

Question

Quizplus · Accepted Answer

Agency cost refers to the cost incurred due to the conflict of interest between the principal (shareholders) and the agent (managers or directors) who work on behalf of the shareholders. When managers or directors take actions that do not align with shareholders' interests, it results in agency costs. Therefore, option A is true, and option B is false.

Agency Cost Occurs When Managers or Directors Take Actions Adverse