Agency Costs and Their Impact on Companies
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Questions and Answers

Which one of the following is a definition of agency cost?

  • The costs incurred if the manager uses the company's resources for his own benefit (correct)
  • The costs of techniques that shareholders use to prevent the manager from prioritizing his interests over the shareholders'
  • The costs arising from the different cultures of foreign subsidiary managers
  • The costs associated with having subsidiaries in foreign countries

    • Which one of the following factors contributes to higher agency costs for multinational corporations (MNCs)?

  • Inconsistency in MNC goal (correct)
  • Sheer size of larger MNC
  • Different cultures of foreign subsidiary managers
  • Distance for subsidiaries in foreign countries

    • What is one way to solve the agency problem in MNCs?

  • Parent control: Clear communication and oversight of subsidiary decisions (correct)
  • Corporate control: Maximizing the values of respective subsidiaries
  • Corporate control: Investor monitoring
  • Parent control: Reducing the power of subsidiary managers

    • Which of the following is NOT a factor contributing to higher agency costs for MNCs?

    <p>Consistency in MNC goal</p> Signup and view all the answers

    What are agency costs?

    <p>The costs incurred if the manager uses the company's resources for his own benefit</p> Signup and view all the answers

    Which of the following is NOT a factor contributing to higher agency costs for multinational corporations (MNCs)?

    <p>Consistency in MNC goal</p> Signup and view all the answers

    What is one technique that shareholders can use to prevent the manager from prioritizing their own interests over the shareholders' interests?

    <p>Investor monitoring</p> Signup and view all the answers

    What is the definition of agency cost?

    <p>The costs incurred if the manager uses company's resources for his own benefit</p> Signup and view all the answers

    What are some factors that contribute to higher agency costs for MNCs?

    <p>All of the above</p> Signup and view all the answers

    What is one way to solve the agency problem in MNCs?

    <p>All of the above</p> Signup and view all the answers

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