The Agency Theory can best be described as:
A) The relationship between top management and the board of directors
B) The relationship between the board of directors and shareholders
C) The relationship between top management and the board of directors, and shareholders
D) The relationship between the external auditors and top management

Question

Quizplus · Accepted Answer

The Agency Theory focuses on the relationships between top management, the board of directors, and shareholders. It explores the potential conflicts of interest that arise when one party (such as top management) is responsible for making decisions that affect another party (such as shareholders). The theory seeks to understand how these conflicts can be managed and minimized. Option A only focuses on the relationship between two parties while option B looks at only two parties in another relationship, while option D focuses on a different relationship altogether.

The Agency Theory Can Best Be Described As