Agency problems may be alleviated by:

Question

Quizplus · Accepted Answer

All three options - incentive contracts, debt, and market for corporate control - can be effective in addressing agency problems. Incentive contracts align the interests of managers and shareholders by tying executive compensation to company performance. Debt financing can impose discipline on management by creating financial obligations and reducing the ability of managers to pursue risky or wasteful projects. The market for corporate control enables shareholders to sell their stakes in poorly performing companies or acquire control of other companies, which can incentivize managers to perform better to avoid losing control of their company. Therefore, all three options can be effective in addressing agency problems.

Agency Problems May Be Alleviated By