Which of the following refers to the possibility that a firm's owners or managers will take actions contrary to the promises contained in the covenants of the securities the firm issues to raise funds?

Question

Quizplus · Accepted Answer

Agency costs refer to the potential conflicts of interest that arise between the owners (shareholders) and managers of a firm. One form of agency cost is the risk that managers will act in their own self-interest rather than in the best interest of shareholders. This can include taking actions that violate the covenants of securities issued by the firm, which could harm investors.

Which of the Following Refers to the Possibility That a Firm's