Which of the following is an example of the agency problem?
A)Managers always invest in projects that have appropriate returns and that will increase shareholder wealth.
B)Managers resign when they believe they have not always acted in the best interests of shareholders.
C)Managers conduct an acquisition program purely to increase the size of an organisation.
D)Managers do not look for new projects as they want to avoid business risk.
E)Both C and D are examples of the agency problem.

Question

Quizplus · Accepted Answer

The agency problem arises when managers prioritize their own interests over those of the shareholders they represent. Conducting an acquisition program purely for the sake of increasing size or avoiding business risk, as described in choices C and D, are both examples of this problem. The other choices do not describe such a conflict of interest.

Which of the Following Is an Example of the Agency