Agency problem

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Agency problem

Conflicts of interest among stockholders, bondholders, and managers.

Agency Problem

A situation in which agents of an organization (e.g. the management) use their authority for their own benefit rather than that of the principals (e.g. the shareholders). The agency problem also refers to simple disagreement between agents and principals. For example, a publicly-traded company's board of directors may disagree with shareholders on how to best invest the company's assets. It especially applies when the board wishes to invest in securities that would favor board members' outside interests.
References in periodicals archive ?
This treatment gives a benchmark measure of the severity of agency problem in firms with the governance problems that might draw takeover bids in the first place.
The spectacular returns generated by some private equity houses over the past half dozen years have been derived from three sources: high leverage, rising asset prices and a business model that cuts out the agency problem inherent in listed companies, by aligning exactly the interests of owners and managers," said Mr Lambert.
Agency problem is entwined with the corporation: (16) separation of
An agency problem exists when participants have different incentives, and information problems prevent one party (the principal) from perfectly observing and controlling the actions of the second (the agent).
A multi agency problem solving group consisting of police, housing services and local councillors produced an action plan to monitor the injunction, which includes CCTV evidence gathering, increased patrols by the community warden and informing local people of the conditions of the injunction.
The moment they become multi-unit systems, individual units are managed by employees, thereby reintroducing the agency problem.
Normally the agency problem of asset substitution (that is, investing in a "higher risk" project than was anticipated) is described where there is a negative net present value project and a debt overhang (10).
the characteristics of high tech corporations may well be totally different from those of traditional corporations, the agency problem of high tech corporations could behave differently than traditional corporations.
Although most of these provisions have merit, they raise more fundamental and often unasked questions: Can we solve the agency problem definitively and, if not, why do we remain so wedded to the form of the public corporation?
The defining characteristic of an agency problem is that one party, the principal, cannot directly control or prescribe the actions of the other party, the agent.
Another agency problem is the difficulty of giving management an equity position in the hospital.

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