Question

Agency problems within a corporation are _______________. a. conflicts among stockholders with differing objectives b. conflicts between stockholders and financial intermediaries c. conflicts among managers with competing interests d. conflicts between managers and stockholders

Answer 1

The correct answer is option d.

Step-by-step explanation:

Agency problems can be defined as the problems that arise out of the conflict of interest when a party is expected to act in the best interest of others.

It arises out of a relationship between an agent and a principal. The agent is supposed to perform a task on behalf of the principal.

For instance, managers of a corporation are agents who are supposed to work in the best interests of principal, who are stockholders. Agency problems will arise when managers will act in their own self-interest instead of the stockholders'.