All else equal, in which of the following forms of business would the possibility of an agency problem be the greatest?
A) A U.S. corporation in which individual stockholders own extremely small proportions of the company.
B) A proprietorship in which the owner is actively managing the business operations.
C) A partnership in which all the partners share management and decision-making responsibilities equally.
D) A foreign corporation with concentrated ownership that is, relatively few owners.
E) A U.S. corporation that gives company shares as incentives to its managers.

Question

Quizplus · Accepted Answer

Agency problems are most likely in a U.S. corporation where individual stockholders own small proportions, as the separation of ownership and control can lead to conflicts between managers and shareholders.

All Else Equal, in Which of the Following Forms of Business