Agency Costs of Free Cash Flow‚ Corporate Finance‚ and Takeovers Michael C. Jensen Harvard Business School MJensen@hbs.edu Abstract The interests and incentives of managers and shareholders conflict over such issues as the optimal size of the firm and the payment of cash to shareholders. These conflicts are especially severe in firms with large free cash flows—more cash than profitable investment opportunities. The theory developed here explains 1) the benefits of debt in reducing agency
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Agency theory relative to corporate governance assumes a two-tier form of firm control: managers and owners. Agency theory holds that there will be some friction and mistrust between these two groups. The basic structure of the corporation‚ therefore‚ is the web of contractual relations among different interest groups with a stake in the company. In general‚ there are three sets of interest groups within the firm. Managers‚ stockholders and creditors (such as banks). Stockholders often have conflicts
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Module Title: Finance Principles Module Code: 5AC002 Module Leader: William Coffie Student Name and Number: Qianhui MA(1223583) Date of Submission: 14th Jan 2013 Words: 1441 Agency Theory and Corporate Governance Introduction In 26th February 1995‚ the Barings Bank‚ one of the oldest banks of the United Kingdom was declared bankrupt. Nick Leeson‚ the trader of the bank in Singapore had lost $1.4 billion on derivatives trading while the bank reported capital was only about
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11) Termination of agency | | | 1. | By agreement | | | | | | a. | On the basis that an agency relationship is created by agreement between the principal and the agent‚ such a relationship can also be brought to an end by mutual agreement between the parties‚ either in writing or orally. | | | b. | Termination by agreement may also occur if the agency relationship is terminated pursuant to the provisions of the agency agreement itself. The following situations may
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Objective of study The objective is to investigate how principle-principle agency conflicts impact on the quality and effectiveness of corporate governance in European listed companies. Motivation for study Most of corporate governance research only reveals that corporate governance can solute the agency conflicts between management and shareholders which fails to identify principle-principle agency conflicts and their influences on corporate governance. Research question Whether
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Termination of agency.A contract of agency is a species of the general contract. As such‚ an agency may terminate in the same way as a contract is discharged except where the agency is irrevocable. Broadly speaking‚ an agency may be terminated either by the act of parties or by the operation of law. (a) Termination by act of parties: A contract of agency may come to an end by the act of the parties as follows: 1. By agreement: An agency is generally created by an agreement‚ it may also be terminated
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Tourism is when someone travels within their own country or to another country such as Spain‚ weather it is for leisure or business reason and for all other purposes. Types of Tourism Description: Example: Describe Domestic: A domestic holiday is where someone who lives in the UK travel to another part of the UK. An elderly couple who lives Bradford goes on a two week holiday to Scarborough. Describe Outbound: An outbound holiday is when someone who travel out of the UK to a different
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holidays travelling. Rich or poor‚ old or young‚ they strive to leave the place where they live or work‚ and move to another spot of our planet — at least for two to four weeks a year. They travel to cities and towns‚ mountains and lakes‚ across oceans and seas. There are several reasons why the popularity of travel and tourism is growing. The first one is educational value of travelling. Man has always moved from one place to another in search of knowledge. Even now‚ in the age of technology and global
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How can the structure-agency debate help us to understand the attitudes towards police work and the actions of Captain Louis De Koster as a police officer? The structure-agency debate is a debate that asks one “to what extent are we shaped by social structure and to what extent do we exercise agency to determine our own biography?”. I am going to use this debate to understand the attitude and actions of Captain Louis De Koster as a police officer. Structure is the complex framework of social
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Running Head: TRAVEL AND TOURISM Travel and Tourism [Name of the writer] [Name of the institution] Abstract This study aims tо explore thе motivations fоr tourists’ choice оf diverse tourism environments іn а Third ’World country‚ Nigeria. Results obtained from а questionnaire survey оf 376 tourists randomly sampled from seven tourism destinations іn Nigeria show that thе most prominent motivations fоr tourist destination choice are self-actualization іn an appreciative‚ educational or cultural
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