The collapse of Enron was the result of a combination of information asymmetry and opportunistic behavior on behalf of the company executives, auditors and legal firms (the agents) and the inability of owners and shareholders (principals) to exercise control. This prominent manifestation of the agency problem led to the catastrophic collapse of the company, which cost the U.S. economy US$ 64 billion in 2002 (add citation)

Critically discuss the following:

·         What are the causes of the agency problem?

·         What measures can be taken to address the agency problem?

Provide examples and use evidence and academic literature to inform your contribution to the discussion.

Answer rating: 100% (QA)

The collapse of Enron serves as a significant example of the agency problem where conflicts of interest and information asymmetry contributed to the downfall of the company The agency problem arises w... View the full answer