The Principal-Agent Problem

question 78

Multiple Choice

The principal-agent problem

• A)occurs when managers have more incentive to maximize profits than the stockholders-owners do.
• B)in financial markets helps to explain why equity is a relatively important source of finance for American business.
• C)would not arise if the owners of the firm had complete information about the activities of the managers.
• D)explains why direct finance is more important than indirect finance as a source of business finance.

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