For an MNC, agency costs are typically:
A) nonexistent.
B) larger than agency costs of a small purely domestic firm.
C) smaller than agency costs of a small purely domestic firm.
D) the same as agency costs of a small purely domestic firm.

Question

Quizplus · Accepted Answer

MNCs have a more complex organizational structure than a small purely domestic firm, which leads to higher agency costs. The agency costs of an MNC are typically larger due to the need for monitoring, controlling and coordinating the activities of different managers, employees and subsidiaries located in different countries. This is not required in a small purely domestic firm, where the owner-manager can personally supervise and control the activities of all employees.

For an MNC, Agency Costs Are Typically