Final answer:
Agency conflicts can arise between debtholders and shareholders, and between managers and shareholders. Shareholders vote to elect a board of directors, who then appoint company managers to oversee operations. Banks are termed financial intermediaries due to their role in channeling funds from savers to borrowers.
Step-by-step explanation:
Agency conflicts can occur between different groups within a company, specifically between debtholders and shareholders, and managers and shareholders. The correct answer would be c) Both (a) and (b) above, which reflects the potential for conflicts of interest between parties who have different objectives related to the company's performance and structure.
Shareholders are the owners of the company and choose the actual company managers through voting rights, typically exercised during the company's annual general meeting or through a proxy voting process. Managers are appointed by the board of directors, who are elected by the shareholders to represent their interests in the strategic direction and governance of the company.
Banks are referred to as financial intermediaries because they facilitate financial transactions between savers and borrowers by collecting deposits and then lending out those funds to individuals, businesses, or governments usually at a higher interest rate than what they pay to the depositors.