1-6 Failure to monitor the actions of firms in a timely and complete fashion after purchasing securities in that firm exposes the investor to agency costs.

Question

Quizplus · Accepted Answer

Failure to monitor the actions of firms in a timely and complete fashion after purchasing securities in that firm can lead to agency costs, which are costs incurred due to the divergence of interests between the investor and the management of the firm. Therefore, it is important to monitor the actions of firms to mitigate these costs.

1-6 Failure to Monitor the Actions of Firms in a Timely