An agency problem is most likely to arise when:
Correct answer: B. Managers pursue personal goals instead of owners' interests
- A. Managers and owners have identical objectives
- B. Managers pursue personal goals instead of owners' interests
- C. Creditors and auditors share the same information
- D. Customers pay suppliers before receiving goods
Explanation
An agency problem results from a conflict between principals, such as shareholders, and agents, such as managers. Managers may pursue benefits such as excessive expansion or personal perks rather than maximising shareholder value.
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