A drawback of separating ownership from control by creating a firm is:

Question

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The principal-agent problem arises when the owners (principals) of a firm delegate decision-making authority to managers (agents) who may have different goals than the owners. This can lead to conflicts of interest and potentially harm the owners' wealth. Separating ownership from control is a key feature of the modern corporation and can exacerbate the principal-agent problem. The other choices (A, B, and D) are not as closely tied to the ownership-control structure of a firm.

A Drawback of Separating Ownership from Control by Creating a Firm