One reason for the existence of agency problems between managers and stockholders is that:
A) there is a significant degree of separation between management and ownership.
B) managers know how to manage the firm better than stockholders.
C) stockholders have unreasonable expectations about managerial performance.
D) none of the above.

Question

Quizplus · Accepted Answer

Agency problems occur due to the separation of ownership and management. Managers may prioritize their own interests over those of the stockholders, and the stockholders may not have enough control over the actions of the managers. This separation creates a conflict of interest, leading to agency problems. Options B and C are incorrect, as they do not provide a valid explanation for the existence of agency problems between managers and stockholders.

One Reason for the Existence of Agency Problems Between Managers