Agency Theory. As suggested in the classic study by Berle and Means, top managers are, in effect, “hired hands” who may very likely be more interested in their personal welfare than that of the shareholders. For example, management might emphasize strategies, such as acquisitions, that increase the size of the firm (to become more powerful and to demand increased pay and benefits) or that diversify the firm into unrelated business (to reduce short-term risk and to allow them to put less effort into a core product line that may be facing difficulty) but that result in a reduction of dividends and/or stock price.