As mergers, acquisitions, and restructuring have increased in importance, agency theory has become more important in assessing whether
A) a stock repurchase should be undertaken.
B) shareholder goals are truly being achieved by managers in the long run.
C) managers are actually agents or only employees of the firm.
D) managers are owners of the company and act the same with the same interests.

Question

Quizplus · Accepted Answer

Agency theory is concerned with the conflicts of interest that exist between the shareholders who own a corporation and the managers who run it. It is used to assess whether managers are truly acting in the best interest of shareholders and achieving their long-term goals. As mergers, acquisitions, and restructuring have increased, the importance of agency theory has also increased in evaluating the impact of these actions on shareholder value. Choices A, C, and D are not directly related to the central concern of agency theory.

As Mergers, Acquisitions, and Restructuring Have Increased in Importance, Agency