To combat the inefficiencies due to the principle-agent problem inside the firms, corporate control mechanisms can be used which includes require managers to hold stipulated amount of firm's equity increase percentage of outsiders serving on board of directors finance corporate investments with debt instead of equity all of the above, Which of the following conditions must hold in order to have a principal-agent problem? The owner of the firm finds it either too costly or impossible to perfectly monitor the manager to block all management decisions that might be harmful to the owner of the business. Complete contracts effectively restrain managers from making value-reducing decisions. Managers and owners have different objectives for the firm. Both a and c.
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