Agency Problem Arises When Managers Deviate from the Goal of Maximisation

question 14

True/False

Agency problem arises when managers deviate from the goal of maximisation of shareholder wealth by placing their personal goals ahead of the goals of shareholders.

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Definitions:

Inheritance

Assets received from someone who has died, possibly subject to taxes depending on the value and the beneficiary's relationship to the deceased.

Holding Period

The length of time an investment is held by an investor, influencing tax treatment of gains or losses upon disposal.

Adjusted Basis

The net cost of an asset after adjusting for various tax-related items including improvements, sales, depreciation, and damage.

Assumes Liability

The act of taking on legal responsibility or debt from another party, often occurring in business acquisitions or financial agreements.