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Unformatted text preview: ACC 333 (Farrell) Class 03 Fall 2011 Page 1 of 2 Additional Study Questions Agency Theory 1. What are the components of agency costs? Does it ever pay to make expenditures to reduce agency costs? Explain. 2. (a) Why do corporations frequently reward salespeople on the basis of a combination of salary and commission rather than salary alone? Explain. (b) List and explain an example of a conflict between the corporate shareholders and the salespeople that this policy likely to generate. 3. Define agency problem. Name two classic examples of agency problems, define each, and provide an example of each. 4. Rational, self-interested people always have incentives to reduce or control conflicts of interest. Do you agree or disagree with this statement? Explain why or why not. ACC 333 (Farrell) Class 03 Fall 2011 Page 2 of 2 Suggested Solutions - Additional Study Questions Agency Theory 1. The components of agency costs are the resources expended to reduce the conflicts of interest (screening...
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- Fall '11