Agency problem
Agency problem also known as agency costs occurs in a two-party relationship (principal/agent) where the agent is expected to act or make decisions for the good of the principal.
For example in a corporate the relationship between the management and shareholders. The management is expected to make decisions that will maximize shareholders interest. The problem arises when the two parties have different interests. In the example above the manager may opt to make his own wealth and not act in the company’s best interest which could be maximizing company’s market value.
Examples of agency relationship in finance
Managers/stockholders
Managers/Creditors
Causes of conflicts between managers and stockholders may include;
Remuneration - low remunerations or fixed salaries despite increased profit margins.
Differences in risk profile- stockholders may prefer high-risk return investments contrary to the managers. When high-risk investment go bad the manager risks job loss
Manipulation of accounting systems- to reflect high profits.
Unnecessary perks management award themselves.
Solution to these problems include threat for firing in case of poor performance, shareholders may also threaten to sell the company, remuneration based on performance, incurring agency costs-these are costs incurred while hiring external auditors, setting a control system, legal costs for employment letters and contracts.
Agency problem may be reduced by motivating the manager to act for the companies best interest by offering incentives
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Answer:
The Binomial nomenclature is the method by which the naming of the organism is done. Each and every organism is known by two names. One is the local name and other is global name which is used by all.
Explanation:
Explanation: The plants and animals are named according to the binomial nomenclature in which the first word of the name describes the genus of the organism and the second word represents the species of the organism.
Here, the individual having the name Pinus palustris and Pinus elliottii belong to the same same genus but different species as their first name is same.
The ability of carbon to form long chains is called Catenation.
<span>Darwin found conglomerate rocks which were important because they held Lots of shells and fossils of teeth and bones of Huge extinct mammals.
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