The Principal-Agent Problem

question 122

Multiple Choice

The principal-agent problem

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

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Definitions:

Complexity Index

A measure used to assess the complexity of a project based on various factors, including scope, technology, and stakeholder involvement.

DPCI Score

A measure used to assess the dimensions of project complexity and their impact on project success, though specific definition may vary.

Project Sponsor

The person or group who provides the financial resources and support for a project, often holding the authority to make major decisions about the project.

Technological Complexity

Refers to the degree of complexity and sophistication of technological systems, including their design, development, and operation.