Question

a decentralized management style is more likely to result in higher agency costs because the subsidiary managers may make decisions that do not focus on maximizing the value of the entire MNC true or false

Answer 1

Answer:

True.

Explanation:

An organizational structure can be defined as the process which typically involves dividing an organization into various functional units.

Basically, the organizational structure comprises of three (3) main dimensions and these are;

I. The vertical dimension: this is typically the decision-making responsibilities (decentralization and centralization).

II. The horizontal dimension: this divides the organization into subunits.

III. Integrating mechanisms: it is based typically on the strategic mechanism that controls the various subunits within an organization.

In the vertical dimension of an organizational structure, decentralization can be defined as a practice which typically involves giving decision-making authority to the lowest chain of command.

This ultimately implies that, in a decentralized organization, decision-making authority and power isn't concentrated at the top level (echelon) of the organization.

Hence, a decentralized management style is more likely to result in higher agency costs because the subsidiary managers may make decisions that do not focus on maximizing the value of the entire multinational corporation (MNC).