The principal-agent problem between VCs and managers.

Question

The principal-agent problem arises because: Select one: a. the agent wants to maximize the company's profit and stock prices while the owners want power and prestige. b. the owners want expensive office building while the agent wants to maximize the Company's profit. c. of the conflict of interest that occurs when principals pursue their own objectives to the detriment of the agent. d. the owners want to maximize company's profit and stock prices while the agent wants power and prestige. e. the stock holders have unlimited liability in case of a loss while the agent does not.

Answer 1

Question

Chapter 21, Problem 21.5IP

(a)

To determine

The principal-agent problem between VCs and managers.

(b)

To determine

The role of two components in the incentive conflict.

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