Business

Question 1: a. Principal-agent conflicts between avouchers and omnibuss because the interests of managers atomic number 18 not by and life-sized aligned with those of owners. The owners¡¯ interests are to maximise their own wealth. The managers are their agents, chartered to actualise decisions on the owner¡¯s behalf. They further own small fraction of the inviolable¡¯s equity, which provides them with piddling inducing to maximize staunch¡¯s value. So, facing the in truth little equity owned, the managers have strong incentives to consume perquisites. If world-shattering benefits associated with the come across of a corporation, including a large salary, great power perquisites, and prestige, those self-interested managers will prejudice their decisions about the wet¡¯s backing and investments to preserve their manipulate and enhance their benefit. Such as managers may choose for the stanch to invest in projects where the manager¡¯s personal relati onships with other(a) parties to the project are critical to the project¡¯s triple-crown completion. The manager at the retiring age powerfulness not be willing to take a great(p) long-run +NPV investment project if their bonus, stipend scheme is nigh cogitate to the performance of the year. The huge initial investment superpower bend current year¡¯s profitability, which results the decrease in the manager¡¯s income. As above, in making decisions, managers would make throw off among three constituencies. They would not try to maximize stockholder value only. Consequently, the conflicts between the parties occur. b.

(i) Monitoring by fiscal in! stitutions.          situate debt is widely held, it can eliminate the free-rider problems especially in reducing the free-rider problem with respect to monitoring the firm¡¯s management. alike it makes the bank has strong incentive to monitor the firm¡¯s performance, which indirectly reduces owner-manager agency costs. (ii) Monitoring by large ¡°block-holders.¡± heavy(p) shareholders have sufficient incentive to actively monitor firm management and also have better and cheaper access to intimacy about the firm, even... If you want to get a full essay, cause it on our website: OrderCustomPaper.com

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