CFA Practice Question

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CFA Practice Question

Aligning the preferences of principals and agents can reduce agency costs. An example is ______.

A. lobbying/political costs
B. financial audits and financial reporting
C. issuing stock options to managers and employees
Correct Answer: C

User Contributed Comments 3

User Comment
forry9er because the agency costs are reduced when interests are more closely aligned?
merc5559 yes
Rasikh Agency costs are the costs incurred by the principle due to agent making a sub-optimal decision, defined as a decision in which the agent prefers his own interest over the principal's.
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