Answer Happy

Agency costs are an integral part of agency relationships. They are a key concern in the shareholder-management relationship in that: a) agency costs result in a reduction in the value of the company, because management pursues its own interests. Ob) agency costs result in a reduction in the value of the company, because of the administration costs in establishing agencies, c) establishment of agency relationships requires extensive legal and contractual arrangements, which can be very costly. d) shareholders view a company that operates as an agent to other companies as being more risky, and therefore they are willing to pay less for shares in the company.