Agency problem

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 ?
The empirical research was conducted in the investigation of the dividend policy and related agency problem which arises between Management and Owners of the firm.
The theoretical approach to deal with the agency problem can be divided into two broad groups.
The relevant agency problem in widely held firms is not the one between controlling owners and minority shareholders but, rather, between professional managers and shareholders (Jensen and Meckling, 1976).
Internal control in a company will prevent the agency problem from arising.
The interest of family shareholders will be in line with those of minority shareholders, the agency problem type I (manager vs.
Fiduciary law is thus one response to the agency problem that arises where one person (the fiduciary) is tasked with making decisions regarding the interests of another (the beneficiary).
This is particularly true for the agency problem between shareholders and management.
The agency problem that arises is the potential expropriation of minority shareholders, for example, controlling shareholders enrich themselves by not paying dividends (Claessens et al.
The agency problem attributed to dispersed ownership is also principally regarded as being that of the control over powerful management.
The agency problem exists everywhere--from the small shop where, on occasion, the manager acts contrary to the wishes, and sometimes the interests, of the principal, the owner, to large, publicly traded firms, where the top executives all too often sell out their stockholders for their own interests.
One of the most effective ways to reducing, if not stopping tax revenue leakage, is to eliminate the agency problem in the Federal Board if Revenue (FBR).
While the agency problem remains paramount, academic attention has shifted over the last decade to a different conflict between large and small (i.

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