The separation of the ownership of the firm from the control of the firm leads to:

Question

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When ownership and control are separated, the managers who control the firm may act in their own self-interest rather than in the interest of the shareholders. This is known as an agency problem, which can lead to conflicts between the two groups and ultimately harm the shareholders' value. Debt financing (A) and equity financing (B) are methods of raising capital, and depreciation (C) is a non-cash expense used to reflect the declining value of an asset over time. None of these options are directly related to the issue of agency problems.

The Separation of the Ownership of the Firm from the Control