Final answer:
The principal-agent problem would not occur if a firm had complete information about the actions of the owners and managers, as it would eliminate the possibility of conflicts of interest and asymmetric information.
Step-by-step explanation:
The principal-agent problem would not occur if a firm had complete information about the actions of the B. Owners; managers.
The principal-agent problem arises when there is a conflict of interest between the owners (principals) and the managers (agents) of a company. This situation is exacerbated by asymmetric information, where one party has more or better information than the other. If owners had perfect knowledge of the managers' actions, they could ensure that those actions align with the owners' interests.
In a well-established company with transparent information regarding products, revenues, costs, and profits, the information gap is narrowed, reducing the likelihood of a principal-agent problem. This transparency attracts external investors, like bondholders and shareholders, who can trust the company's disclosures and are willing to invest despite not knowing the managers personally.