Loss in value from conflicts of interest between managers and other stakeholders are called ________.
A) adverse selection costs
B) agency costs
C) costs of financial distress
D) sunk costs
E) transactions costs

Question

Quizplus · Accepted Answer

Agency costs are the loss in value from conflicts of interest between managers and other stakeholders, such as shareholders or creditors. Adverse selection costs result from a lack of information before making a decision, costs of financial distress arise from the possibility of bankruptcy, sunk costs are costs that have already been incurred and cannot be recovered, and transactions costs are costs of making a transaction or conducting business.

Loss in Value from Conflicts of Interest Between Managers and Other