Agency problems may give rise to constraints that ____ the market value of firms.
A) increase
B) decrease
C) do not affect
D) are not important to

Question

Quizplus · Accepted Answer

Agency problems arise from conflicts of interest between the various stakeholders of a firm such as shareholders, management, and employees. These conflicts can cause constraints on the decision-making process and lead to suboptimal outcomes that reduce the market value of the firm. Therefore, agency problems generally decrease the market value of firms.

Agency Problems May Give Rise to Constraints That ____ the Market