perspective‚ restraints and loopholes indeed exist in the current context of economy. 2 The Current Pay System In the beginning of 1990s‚ a high level of executive compensation has already been regarded as an effective measure to solve the principal-agent problem within a company‚ that is‚ to align the benefit of shareholders and executive managers. It’s believed that the rise in executive pay serves as strong incentives‚ and conceivably‚ it could be stronger with a larger sum of money (Jenson‚ M and
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Agency Theory and Its Consequences A study of the unintended effect of Agency Theory on Risk and Morality M.Sc. FSM Master Thesis: Agency Theory & Its Consequences Master Thesis at Copenhagen Business School Student: Thomas Rüdiger Smith Programme: M.Sc Finance & Strategic Management Advisor: Sven Junghagen‚ Department of Management Politics & Philosophy August‚ 2011 Total Pages: 78 (133 with appendix and summary) Characters: 181647 (246486 with appendix and summary) Thomas Rüdiger
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accounting practice to be used. However‚ this theory is rather unrealistic‚ when the accounting information is treated as public product and it is available to everyone. Further on‚ ‘free-rider’ problem such as ‘certain people getting benefit from something that paid by other people ‘will distorts the market. More problems coming up when users cannot decide on what they need and accountants not satisfy on procedures. All this causes inefficiency in accounting information market. At this point‚ government intervention
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relationship is a contract under which one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent. If both parties to the relationship are utility maximizers and they may have divergent goals and objectives‚ and there is good reason to believe that the agent will not always act in the best interests of the principal (Jensen‚ Michael C.‚ and William H. Meckling. "Theory of the Firm
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By S.Murdhen 1 Table of Contents 1. INTRODUC TION .............................................................................................................. 3 2. B rief Objectives .................................................................................................................. 4 3.0 Brief Liter ature Rev iew ........................................................................................... 4 3.1 Cornerstones of dividend policy .............................
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influencing factors of capital structure and how to effectively manage it. Due to the conflicts among the debtors‚ managers and shareholders etc‚ this essay will also illustrate the agency problems that are existed in the companies and evaluate the role of effective financial management in addressing these problems. 2.0 The ways that capital structure affects corporation value The capital structure is refered to the allocation between the long-term debt and equity‚ which determines the solvency and
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precisely because people are motivated by things other than money. Self-interest does not mean that people have no altruistic motives. And altruism‚ the concern for the well-being of others‚ does not make a person a perfect agent who does the bidding of others. This means that agency problems cannot be solved by instilling greater altruism in people (even if we could do so). I also discuss the universal tendency of people to behave in non-rational ways. Though they are Resourceful‚ Evaluative Maximizers (the
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ECGI European Corporate Governance Institute Finance Working Paper No. 39/2004 Negotiation‚ Organization and Markets Harvard University Working Paper No. 04-26 Agency Costs of Overvalued Equity Michael C. Jensen Harvard Business School; The Monitor Company; Social Science Electronic Publishing (SSEP)‚ In. This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection at: http://ssrn.com/abstract=480421 MICHAEL C. JENSEN April 2004
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lies in maximising their life-time income and that ‘such self-interest will be congruent with profit maximisation for the firm only in special cases’. This conflict between both the shareholders and the managers is termed the agency problem. Alongside the agency problem comes agency costs‚ which is the costs incurred to prevent the managers from prioritising their interests over the shareholders. It can be argued that the extent to which managers will have discretion to pursue actions that are not
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2012 18 December 2012 Accepted 18 December 2012 Jonchi Shyu Department of Business Administration‚ National Taiwan University of Science and Technology‚ Taiwan‚ Republic of China Abstract Purpose – This study seeks to examine how agency problems and internal capital markets in group-affiliated firms are mutually influenced by the ownership structure‚ capital structure‚ and performance. It also aims to examine the endogeneity in group affiliation. Design/methodology/approach – Using panel
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