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An agency problem can occur when_____________.

A) the desires and objectives of the owners and agents conflict.
B) there is too much oversight.
C) the owners and agents share the same attitudes toward risk.
D) executives select risky strategies because they fear losing their jobs if the strategy fails.
E) there is a dual role for the CEO and chair of the board.

Respuesta :

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Answer:

A) the desires and objectives of the owners and agents conflict.

Explanation:

An agency problem occurs when there is conflict of interest in a situation where one part is expected to act in the best interest of the other.

In finance this usually occurs between the management and stockholders, the manager is an agent for the stockholder (principal). The manager is expected to run the business and make profit for the principal and may instead maximise his own wealth.

Agency problem arises when an agent is motivated to act in his own interest and not fully for his principal.

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