The ____________ refers to the potential conflict between management and shareholders due to management's control of pecuniary rewards as well as the possibility of incompetent performance by managers.

Question

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The agency problem refers to the potential conflict between management and shareholders due to management's control of pecuniary rewards (e.g. salary, bonuses, stock options) as well as the possibility of incompetent performance by managers, which can result in a misalignment of incentives between both parties. The diversification problem relates to the risk reduction benefits of investing in a variety of assets or businesses, the liquidity problem refers to the ability to convert assets into cash quickly, the solvency problem relates to a company's ability to meet its debt obligations, and the regulatory problem pertains to compliance with laws and regulations.

The ____________ Refers to the Potential Conflict Between Management and Shareholders