IFoA CB1 Practice Questions - IFoA Subject CB1 Business Finance Exam

Under the agency theory of the firm, an 'agency cost' most directly arises because:

Shareholders and the directors they appoint may have divergent interests Auditors are paid a fixed fee regardless of audit quality Companies must comply with international financial reporting standards Dividends are taxed differently from capital gains

Correct Answer:

Shareholders and the directors they appoint may have divergent interests

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