__________ theory suggests that public corporations can function effectively even though their managers are self-interested and do not automatically bear the full consequences of their managerial actions.

Question

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Agency theory suggests that managers may act in their own self-interest rather than in the interest of shareholders, and the agency problem arises as a result of the separation of ownership and control in public corporations. This theory proposes that the use of appropriate incentives and monitoring mechanisms can align the interests of managers with those of shareholders, thereby mitigating the agency problem.

__________ Theory Suggests That Public Corporations Can Function Effectively Even