What is an agency relationship? What is managerial opportunism? What assumptions do owners of corporations make about managers as agents?
a) An agency relationship is a legal agreement between a principal and an agent where the agent acts on behalf of the principal. Managerial opportunism refers to the self-interested behavior of managers at the expense of the firm's owners. Owners of corporations assume that managers will act in the best interest of the firm.
b) An agency relationship is a financial arrangement between a principal and an agent where the agent manages investments on behalf of the principal. Managerial opportunism refers to the ability of managers to exploit opportunities for personal gain. Owners of corporations assume that managers will prioritize their own interests over the firm's.
c) An agency relationship is a social contract between a principal and an agent where the agent represents the interests of the principal. Managerial opportunism refers to the tendency of managers to take advantage of their position for personal gain. Owners of corporations assume that managers will act in the firm's best interest.
d) An agency relationship is a business agreement between a principal and an agent where the agent carries out tasks on behalf of the principal. Managerial opportunism refers to the practice of managers seeking personal gain at the expense of the firm. Owners of corporations assume that managers will prioritize shareholder value.
