Managerial reputation is an _____ incentive that helps to mitigate the _______ principal agent problem.

Question

Quizplus · Accepted Answer

Managerial reputation serves as an internal incentive that helps to mitigate the principal-agent problem between owners and managers. This is because managers who have a good reputation will be more likely to act in the best interest of the owners, as they have a personal stake in maintaining their reputation. Internal incentives are those that arise from within the organization, such as reputation, whereas external incentives come from outside the organization, such as market competition or regulation. The manager-consumer and owner-consumer relationships are not typically influenced by managerial reputation.

Managerial Reputation Is an _____ Incentive That Helps to Mitigate