Final answer:
Accounting information helps reduce agency problems by promoting financial transparency, which alleviates imperfect information and aligns managers' and shareholders' interests.
Step-by-step explanation:
Accounting information reduces agency problems in relationships between management and shareholders by promoting financial transparency. When a firm shares detailed information about products, revenues, costs, and profits, it alleviates the issue of imperfect information. Managers inside a firm naturally have more knowledge about the company’s potential for profit than outside investors. By providing accurate accounting information, shareholders who are typically not as knowledgeable have a better understanding of the company's financial health and future prospects. This transparency reduces the information asymmetry and helps align the interests of the managers with those of the shareholders, as it enables shareholders to make more informed decisions regarding their investments and oversight, including decisions about who will serve on the board of directors.