The separation of ownership from managerial control of a firm is known as the agency problem.

Question

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The separation of ownership from managerial control creates a situation where there is a potential conflict of interest between the owners/shareholders of a firm and its managers. This gives rise to the agency problem, where managers may prioritize their own interests over the interests of shareholders, leading to inefficiencies and reduced shareholder value.

The Separation of Ownership from Managerial Control of a Firm