What does the agency problem refer to?
A) The conflict that exists between the board of directors and the employees of the firm.
B) The problem associated with financial managers and Internal Revenue agents.
C) The conflict that exists between stockbrokers and investors.
D) The problem that results from potential conflicts of interest between the manager of a business and the stockholders.

Question

Quizplus · Accepted Answer

The agency problem refers to the potential conflicts of interest between the managers of a business and the company's stockholders. This can arise when managers prioritize their own interests or goals over those of the shareholders, leading to a misalignment of incentives and potentially harmful decisions for the company's financial performance.

What Does the Agency Problem Refer To