Conflicts of Interest Between Shareholders and Managers of a Firm

question 19

Multiple Choice

Conflicts of interest between shareholders and managers of a firm result in:

• A) Principal-agent problem
• B) Increased agency costs
• C) Both A and B
• D) Managers owning the firm

---

Definitions:

Public Policy

A course of action or regulations adopted by government to address societal issues, guide decisions, and achieve rational outcomes.

Legislative Environment

The legal and regulatory framework within which an organization operates, influenced by laws and policy-making bodies.

External Political Advocacy

Activities conducted outside of an organization to influence political decisions or policies in favor of a particular cause or interest.

Statutory Law

Statutory law consists of laws and statutes that have been enacted by legislative bodies, such as Congress or state legislatures, formally codifying regulations and legal standards.