As it relates to owners and managers, the principal-agent problem results from the

Question

Quizplus · Accepted Answer

The principal-agent problem arises due to the separation of corporate ownership and control, where the owners (principals) entrust the management (agents) with the responsibility of making decisions and taking actions that will benefit the company. However, the agents may prioritize their own interests over those of the principals, potentially resulting in conflict, inefficiency, and reduced value for the owners. Double taxation (B) and limited liability (C) are unrelated to the principal-agent problem, while differing interests of stockholders and bondholders (D) can lead to conflicts but are not the primary cause of the problem.

As It Relates to Owners and Managers, the Principal-Agent Problem