Which of the following is a conclusion of agency theory?
A) Managers may accept excessive financial risks to increase the returns to shareholders.
B) Managers tend to avoid high-risk, high-return investments that may jeopardize their positions if successful.
C) Managers will always use the least expensive source of funds to finance investments.
D) Managers will tend to put the stockholders interests before their own security and ambitions.

Question

Quizplus · Accepted Answer

Agency theory suggests that managers, acting as agents for shareholders, may avoid high-risk, high-return investments to protect their own job security, even if such investments could benefit shareholders.

Which of the Following Is a Conclusion of Agency Theory