Agency costs can be thought of as the loss in the value of a firm resulting from the following actions by managers:
A)reduced effort, perks or private benefits, and avoiding risks.
B)reduced effort, perks or private benefits, and entrenching investments.
C)reduced effort, perks or private benefits, empire building, and entrenching investments.
D)reduced effort, perks or private benefits, empire building, entrenching investments, and avoiding risks.

Question

Quizplus · Accepted Answer

Agency costs arise from conflicts of interest between managers and shareholders. Managers may engage in actions like reduced effort, seeking perks or private benefits, empire building, making entrenching investments to secure their position, and avoiding risks that could potentially benefit shareholders but threaten their job security, all of which can reduce the firm's value.

Agency Costs Can Be Thought of as the Loss in the Value