determination of corporate optimal capital structure under value maximzation and information asymmetry”‚ Journal of Economics and Business‚ Vol. 36‚ 1‚ pp. 65-75 Theilen‚ B. (2003) “Simultabeous moral hazard and adverse selection with risk averse agents”‚ Economics Letters‚ Vol. 79‚ 2‚ pp. 283-289 Philosophov‚ L. V. & Philosophov‚ V. L. (1999) “Optimization of corporate capital structure: A probabilistic Bayesian approach”‚ International Review of Financial Analysis‚ Vol. 8‚ 3‚ pp. 199-214
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Genzyme. However‚ besides losing the tax shield from debt‚ high equity financing leads to an increasingly diffused ownership‚ which would in turn causes problems such as shareholder – management principal – agent problem and asymmetric information problem. Principal – agent problem: As agent of the shareholder (principal)‚ management should aim at maximizing shareholders’ value‚ i.e. the market value of the equity. However‚ management tends to serve its own interests. In order to make management
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imperfect labor and capital markets‚ managers will seek to maximize their own utility at the expense of corporate shareholders. Agents have the ability to operate in their own self-interest rather than in the best interests of the firm because of asymmetric information and uncertainty (e.g.‚ myriad factors contribute to final outcomes‚ and it may not be evident whether the agent directly caused a given outcome‚ positive or negative). Evidence of self-interested managerial behavior includes the consumption
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prevent such instances happening in your company. 1.0 Suggestions to resolve Agency relationship problems. An agency relationship arises whenever individuals‚ known as principals‚ hire individuals‚ known as agents‚ to perform services and delegate decision-making authority to the agents. The primary agency relationships in business are generally: (1) between stockholders and managers and (2) between debt holders and stockholders. When agency occurs it also tends to give rise to agency costs
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References: Albanese‚ R.‚ M. T. Dacin & I. C. Harris (1997) Agents as stewards. Academy of Management Review‚ 22‚ 609-611. Archie‚ B. C. & N. Juha (1997) Understanding Stakeholder Thinking: Themes from a Finnish Conference. Business Ethics: A European Review‚ 6‚ 46-. Bales‚ F. R. (1958) Task roles and social roles
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rational utility maximizers conflicts of interests whenever one less informed party (principal) depends on the actions of another better informed party (agent). Characteristics: info asymmetry makes it impossible for principal to perfectly determine agent’s marginal productivity. This creates an incentive for agents to shirk‚ as agent enjoys full benefit of shirking‚ while the cost of shirking is shared by the principal. This
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Chapter 14 Questions 1. A principal-agent relationship is a relationship where an agent makes decisions that affect the principal. Examples of explicit principal-agent relationships are the relationships between a client and a lawyer and between an investor and a money manager. Examples of implicit principal-agent relationships are an employee acting on behalf of its employer and a consumer making decisions‚ such as copying and selling a product‚ that can affect a manufacturer. 2. The
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In a broad manner‚ organisational theories can be defined as formal social organisations and their interrelationship with the environment in which they operate. This reading provides insight into the agency and the contingency organisational theories‚ and how management implement these theories into the environment in which their business operates. It also outlines the issues and limitations of these theories‚ using the Coca Cola company as a relevant case study. In addition‚ this essay examines
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more recent literature on corruption as a principal-agent problem whose significance for development depends on its dimensions related to the nature of the corrupt transaction itself‚ such as distinctions based on the agents involved‚ scale‚ type of deal‚ predictability‚ industrial organisation‚ etc.‚ all of which affect for better or worse the nature of the relationship between principal (as represented by the public interest) and the agent (politicians and bureaucrats). From this viewpoint
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Narra sap: A prospect anti-fungal agent against ringworm infestation Chapter 1 Introduction Background of the Study Observing that narra sap can heal ringworms faster than commercial products. We conduct this study because of its beneficiary and practicability. And used as a natural medicine for natives in Mindanao. As we encounter this problem called ringworm‚ we decided to make a medicinal treatment for it. And we discovered that narra‚ aside of its other parts‚ it’s sap also have a
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