Two common agency problems include
A) managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk aversion.
B) managers not investing enough of a firm's capital in managerial perquisites and managerial risk aversion.
C) managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm and managerial risk seeking.
D) managers not investing enough of a firm's capital in managerial perquisites and managerial risk seeking.

Question

Quizplus · Accepted Answer

The two common agency problems are managers investing some of a firm's capital in managerial perquisites that do not add economic value to a firm, which is an example of the principal-agent problem, and managerial risk aversion, which refers to managers being overly cautious in their decision-making to protect their own interests rather than taking risks that would benefit the firm. Option B, C and D are incorrect because they do not accurately represent the two common agency problems.

Two Common Agency Problems Include