Agency theory holds that management always tries to maximize the value of the firm

• b. False

The agency theory argues that there exists a conflict of interests between the owners and the management. As agents, the management is expected to serve the interests of the principal. The objective is to maximize the value of the firm and by doing so also maximize the wealth of the owners. However, the management does not always focus on this objective and instead divert from it to serve their own interests. The interests of the management differ from those of the owners and this leads to the conflict of interests which then requires the owners to incur agency costs to mitigate them.