One reason for the existence of agency problems between managers and shareholders is that:
A) there is a separation of ownership and control of the company.
B) managers know how to manage the company better than shareholders.
C) shareholders have unreasonable expectations about managerial performance.
D) none of the above

Question

Quizplus · Accepted Answer

The separation of ownership and control of the company means that the shareholders, who are the owners of the company, delegate the management of the company to professional managers. This creates an agency problem because the managers may have incentives that are not aligned with the shareholders' interests, and may act in their own self-interest rather than maximizing shareholder value.

One Reason for the Existence of Agency Problems Between Managers