An agency problem caused by the limited ability of stockholders to precisely determine the competencies and priorities of executives at the time they are hired refers to

Question

Quizplus · Accepted Answer

This scenario is an example of adverse selection, which occurs when the party with more information (in this case, executives) has an advantage over the party with less information (in this case, stockholders). Stockholders may not have a complete understanding of an executive's skills and priorities at the time of hiring, leading to a potential agency problem.

An Agency Problem Caused by the Limited Ability of Stockholders