The agency costs of an MNC are likely to be lower if it:
A) scatters its subsidiaries across many foreign countries.
B) increases its volume of international business.
C) uses a centralized management style.
D) A and B.

Question

Quizplus · Accepted Answer

Using a centralized management style helps to reduce agency costs by promoting better coordination and control within the MNC. With a centralized management style, the parent company can more closely monitor the actions of its subsidiaries, and ensure that they are following the company's overall strategy and goals. This reduces the likelihood of conflicts of interest and other agency issues that can arise when subsidiaries operate more independently. Scattering subsidiaries across many foreign countries or increasing the volume of international business may actually increase agency costs by complicating management and increasing the risk of agency problems.

The Agency Costs of an MNC Are Likely to Be