Agency costs occur when managers choose the easiest form of financing over the value maximizing capital structure.

Question

Quizplus · Accepted Answer

Agency costs arise when managers prioritize their own interests over those of shareholders, leading to decisions that may not maximize the company's value. This can result in choosing financing options that are more convenient or less risky for the managers, but that do not necessarily maximize shareholder value.

Agency Costs Occur When Managers Choose the Easiest Form of Financing