between the seller / the principal and the representative / the agent is governed by the Law of Agency. A fiduciary relationship created under the law of agency in which one person has a legal authority to act for another‚ can arise from1. 1. An oral or written expressed agreement‚ whereas agent is appointed by the principal for a particular task‚ 2. Ratification of an agent’s conduct that the principle didn’t authorise‚ 3. Implied agreement created by assumed agent authority to enter into
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Finance Association Efficient Capital Markets: II Author(s): Eugene F. Fama Source: The Journal of Finance‚ Vol. 46‚ No. 5 (Dec.‚ 1991)‚ pp. 1575-1617 Published by: Blackwell Publishing for the American Finance Association Stable URL: http://www.jstor.org/stable/2328565 Accessed: 30/03/2010 21:19 Your use of the JSTOR archive indicates your acceptance of JSTOR ’s Terms and Conditions of Use‚ available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR ’s Terms and Conditions
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Essay: Discuss the terms moral hazard and adverse selection. In your discussion you should consider the following: a) When does it arise? b) What are its consequences? And c) What can be done about it? WORD COUNT: 2502 Today we live in the information age‚ characterized by the internet‚ social networking and twenty four hour news with a constant stream of information flowing between users. This has lead to an economy where buyers can get immediate access to information about rival products
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It is measured by the return on the capital resources it uses which means the combination of debt and equity. This is given by the ratio return on capital employed (ROCE)‚ return on investment or accounting rate of return. This tells investors how successful the business is by analyzing the profitability. The higher ROCE‚ the more liable it is to carry a high return to the investors resulting in higher dividends and rising share prices. The profitability is important for businesses which want
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Freight Forwarders can act as either a Principal or Agent. Describe in your own words the differences between each. Under what circumstances might a Freight Forwarder want to act as either a Principal or Agent? When Freight Forwarders act as principal‚ they assume all responsibility and liability for the pick-up‚ handling‚ transporting and delivery of the shipment as a regular common carrier would. Their name is on the BOL. When a Freight Forwarder acts as an agent‚ their liability ends once they
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Objectives Capital market‚ being an essential element of today’s economy‚ demands an intensive and special attention. The objective of this study is to look into every aspect of Bangla-desh capital market and identify its various pros and cons along with efficient market hypothesis. The specific objectives of this study are: To give an overall idea about the capital market-its structures‚ functions‚ importance‚ etc. To compare the relative conditions of Bangladesh capital market effeciency.
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\subsubsection{Adverse Selection and Moral Hazard Problems} The adverse selection problem can best be described as following: insiders usually have more details about the company and its real value than outsiders and this has an influence on the quality of the firms that go public (Leland and Pyle‚ 1977; Gill de Albornoz and Pope‚ 2004)). This is also called the lemons problem (leland and Pyle‚ 1977). As already discussed‚ these asymmetry costs could lead to IPO underpricing (Rock‚ 1986; Welch‚ 1989)
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Discuss the following proposition in the context of the professional sporting clubs in this case (you may choose to focus upon only the Essendon Football Club): ‘Principal-Agent problems are caused by insufficient oversight by company directors.’ Corporate Governance is a complex field that started to develop very quickly this last decade. The collapse of international firms‚ the financial crisis‚ the international scandals‚ the pressure from the governments and non-profit organizations… are all
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Financial market is a significant factor in economy development. Through financial market‚ people are able to transfer their surplus funds to those who have shortage which enhance efficiency. China’s financial market started relatively late compared with developed countries. After the economy reform in 1978‚ China’s step by step build up its own financial system. With the continuous improvement of the financial markets‚ people are started to question about whether China’s financial market can perform
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What is your opinion of the Efficient Market Hypothesis? When it comes to the valuation of a particular stock do you think that all information regarding the company is in the public domain? What brought you to your opinions? The Efficient Markets Hypothesis (EMH) according to Brigham and Ehrhardt (2011) “asserts that (1) stocks are always in equilibrium and (2) it is impossible for an investor to “beat the market” and consistently earn a higher rate of return than is justified by the
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