Question

Problem 3 Part 1 Attempt 2/2 for 10 pts. Why is the agency problem more pronounced for multinational corporations? Check all that apply: Managers raised in different cultures may have different goals and values. Monitoring managers in foreign countries is more difficult. MNCs are often larger than purely domestic companies. There are no international laws to prevent agency problems. Submit

Answer 1

why is Agency problem more pronounced for MNC:

1. Managers raised in different cultures may have different goals and values : this is correct when a company is spread across geographies managers from different regions have different priorities.

2. Monitoring Managers in foreign countries is more difficult : this is also true the cost of monitoring multiple managers in multiple locations is high and leads to agency problems

3.MNC s are often larger than purely domestic companies : this statement is true due do large size there is more informational asymmetry.

4.there are no international laws to prevent agency problems: this statement is also true the most effective way of solving agency problems is incentivising mangers to act in favour of investors and having very strong corporate governance structures.