Agency Theory?

Question

Because the stakes are so high, the budget cycle takes almost six months to complete, as each manager makes a case several times to the top executives and negotiates the appropriate budget.

What kind of agency cost is typified by Addison’s approach to budget setting?

1. Monitoring Cost

2. Incentive Compensation Cost

3. Bonding Cost

4. Residual Loss

Answer 1

1. Monitoring cost