In the context of agency theory, information asymmetry refers to the idea that:
A)information can vary in its comparability.
B)information can vary in its relevance.
C)management has more information about the entity's true financial position than do the absentee owners.
D)management will not act in the best interests of the absentee owners.

Question

Quizplus · Accepted Answer

Information asymmetry is the unequal distribution of company information between management and absentee owners. In this scenario, management possesses more information about the entity's true financial position, which can lead to potential conflicts of interest and agency problems if management chooses to act in their own interests instead of the absentee owners.

In the Context of Agency Theory, Information Asymmetry Refers to the Idea