Agency costs may include:

Question

Quizplus · Accepted Answer

Agency costs refer to the costs incurred by a firm to mitigate agency problems between managers and shareholders. These costs can include auditing of financial statements to ensure that managers are reporting financial performance accurately and liability insurance for board members to protect against potential lawsuits. Additionally, agency costs may arise from management perks, such as excessive compensation or luxurious expenses, which can reduce overall shareholder value. Therefore, all of the above options are valid examples of agency costs.

Agency Costs May Include