Managers can best reduce agency costs by

Question

Quizplus · Accepted Answer

Holding agents responsible for the outcome of their decisions and rewarding them for good performance will incentivize them to act in the best interest of the organization and reduce the likelihood of shirking or opportunistic behavior. Giving agents less decision-making authority may limit their ability to make necessary and effective decisions, while constantly monitoring their actions may create an environment of mistrust and reduce motivation. Reporting residual income in ASIC reports may be useful for evaluating performance, but it does not directly address agency costs.

Managers Can Best Reduce Agency Costs by