The Principal-Agent Problem ________

Multiple Choice

The principal-agent problem ________.

A) occurs when managers have more incentive to maximize profits than the stockholders-owners do
B) in financial markets helps to explain why equity is a relatively important source of finance for Canadian business
C) would not arise if the owners of the firm had complete information about the activities of the managers
D) explains why direct finance is more important than indirect finance as a source of business finance