Question

True or False: A small number of institutional investors are often able and motivated to bring direct shareholder pressure on a firm’s management in an effort to reduce potential agency conflicts. True False

Answer 1

Answer: True

Step-by-step explanation:

The agency problem is when there is a conflict of interest between the management of a company and the stockholders that exists in the company.

In order to help reduce the potential agency conflicts that at occur during the course of a business, a few of the institutional investors often bring in the pressure of the direct shareholder on the management of a firm. They believe by involving the shareholders, the management will try not to have any differences with the shareholders and thereby reducing agency problem.