The agency relationship in corporate finance refers to:
A)when the shareholders hire a manager to run their company.
B)when the corporate hires an advertising agency to market their new product or service.
C)when the board of directors are elected to staggered terms.
D)when the board of directors oversee the CEO.

Question

Quizplus · Accepted Answer

The agency relationship in corporate finance refers to the relationship between shareholders (principals) and managers (agents) where agents are hired to act on behalf of principals. This creates a potential conflict of interest between agents and their principals, as the agents may act in their own interest rather than the principals'.

The Agency Relationship in Corporate Finance Refers To