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Select as choices all of the following that you believe depict the agency relationship inside the corporation. Note: A correct answer requires that you check ALL that apply. The compensation plan has many advantages but using it to reduce agency costs is NOT one of these advantages. The goal of shareholder wealth maximization often leads to agency costs. One of the goals of the study of modern corporate finance is to maximize agency costs. In the context of the agency relationship shareholders are the principals. In the context of the agency relationship managers are the principals. One type of agency costs are lost opportunities caused by conflicts too difficult to resolve. The goals of the managers may not always align themselves with the goals of the shareholders.

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Answer #1

In the context of agency relationship shareholders are the principals.

check the 4th point and uncheck 5th, others are all correct.

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