A root cause of firm agency costs is

Question

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Agency costs arise from the conflict of interest between the owners (shareholders) and the managers. Managers may prioritize their self-interest over the interests of shareholders, resulting in agency costs. Hence, a manager's concern for their personal well-being is a root cause of firm agency costs. Carelessness or federal agency filing requirements may lead to inefficiencies, but they are not necessarily the main cause of agency costs. A manager owning too much of their firm's stock may align their interests with shareholders, reducing agency costs. Hence, it is not a root cause of agency costs.

A Root Cause of Firm Agency Costs Is