Agency theory makes the assumption that individuals in agency relationships are _____ and will always take actions to enhance their self-interests.
A) utility-maximizers
B) negotiators
C) satisficers
D) adopters

Question

Quizplus · Accepted Answer

Agency theory is based on the assumption that individuals act rationally and in their own self-interests when making decisions, known as utility maximization. This assumption is necessary for establishing the principal-agent relationship and identifying potential agency costs. Therefore, choice A, utility-maximizers, is the best answer.

Agency Theory Makes the Assumption That Individuals in Agency Relationships