If the management of a company makes decisions that are most beneficial to themselves, as opposed to benefitting shareholders, the cost associated with this is referred to as:
A) a fixed cost.
B) an agency cost.
C) an operating cost.
D) a compensation expense.

Question

Quizplus · Accepted Answer

Agency costs arise when there's a conflict of interest between the management (agents) and the shareholders (principals), particularly when management actions prioritize their own benefits over those of the shareholders.

If the Management of a Company Makes Decisions That Are