Table of Content
ABSTRACT 1
1 INTRODUCTION 2
2 INTERNATIONAL JOINT VENTURES ORGANIZATIONAL STRUCTURE 3
2.1 PARENT FIRMS, IJV MANAGERS RELATION 3
2.2 PARENT FIRM’S RELATIONS 4
3 RIGHTS, FUNCTIONS OF BOD, PARENT FIRMS, IJV MANAGERS 6
3.1 PARENT FIRM’S RIGHTS, FUNCTIONS 7
3.2 BOD’S FUNCTIONS IN IJV 9
3.3 IJV MANAGER’S DUTIES 10
4 CONCLUSION 12
REFERENCES 13
Abstract
This paper figures out IJV structure and mechanisms such as principal agency problems and hold–up problem in International Joint Ventures. Thereby it is appropriated to examine the relationship between the parental firms, and how they can elaborate the operation of the Board of Directors and the Joint Venture managers. This refers to an organization of
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Additionally, the BOD has a direct relation with IJV managers. The structure of IJV helps us to understand the challenges that parent firms face in designing the contract.
2.1 Parent firms and IJV managers relation
IJV managers are promoted to the venture by the parent firms in order to represent the parent firm’s culture, goals etc. Therefore, IJV managers are working on behalf of the both parent firm’s objectives in the IJV. In this context, agency theory helps us in understanding the relationship between the IJV managers and parent firms.
“Agency theory is concerned with resolving two problems that can occur in agency relationships. The first is the agency problem that arises when (a) the desires or goals of the principal and agent conflict and (b) it is difficult or expensive for the principal to verify what the agent is actually doing.”
The cause of the agency problem between IJV and parent firm relation is that the parent firm usually lacks of measuring and controlling the behavior of the managers appropriately. That means that information is asymmetric and IJV managers have more information about the ongoing works of the IJV than their parent firms. Therefore, IJV managers generally show the tendency to satisfy their self-interest instead of the parent firm’s interest. In this context, two different kinds of agency problem arise, namely moral hazard and adverse
Can you think of one threat that arises from the use of agency theory in developing measures aimed to prevent future banking and/or financial failures?\
Agency law is a relationship between a principal and in agent in which the agent is legally authorized to act on the behalf of the principal.
The scope of this paper is to analyze the kind of agency problems that emerges between The Hershey Company and their stakeholders and shareholders. To answer this, a review of the company`s board structure and ownership structure was made. Thereafter two specific situations that has occurred in recent times was used as case examples to enlighten the agency problems suggested to emerge by the corporate structure.
2. A principal-agent relationships involves the owners (principals) delegating decision-making authority to managers (agents). A conflict occurs when the agents pursue acceptable levels of shareholder wealth and profit rather than a maximization of profit. They are pursuing their own self-interests. One way that the agents act in their own self-interests would be by focusing on long-term job security. This could cause the agents to limit the amount of risk taken by the firm. The firm may have an opportunity that is considered a riskier venture that could produce high profits if successful. If the venture proves to be unsuccessful, then the agent is at risk of dismissal. Therefore,
Our textbook defines an agency problem as a “conflict between the goals of a firm’s owners and its managers” (Megginson & Smart, 2009). It then defines agency costs as dollar costs that arise because of this conflict. In the corporate structure, stockholders are the owners of the firm, and they elect a board of directors to oversee the firm and help protect their investment. The board then hires the right corporate managers to run the firm with the goal of maximizing the wealth of the
After carefully analyzing the industry situation, it is important to take a look at the internal structure mechanism of the company as to how it affected the firm’s current success.
In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm’s management. This separation of ownership from control in the corporate form of organization is what causes agency problems to exist. Management may act in its own or someone else’s best interests, rather than those of the shareholders. If such events
Agency problems are said to be inherent in the corporate form of an organization. Why
International joint ventures is an overseas business owned and controlled by two or more partners; starting such a venture is often as an entry strategy (Deresky, H. 2014.p.377), while joint ventures refers to an independent entity jointly created and owned by two or more parent company.
Agency relationship refers to a consensual relationship between two parties, where one person or entity authorizes the other to act on his, her or its behalf, and they exist as mutual agreements between individuals, small firms and large organizations. Managerial opportunism is when managers use employer information for personal gain, this creates a conflict of interest, with self-serving managers making decisions that benefit them rather than the company owners or shareholders. Corporate governance problem deals with
It is because through the joint venture, the company is more familiar with the situation of the company there. The negative outcome is that the management system different between the company. So it is hard to make a decision making. It is because there is different opinion of each person.
Agency problem is a potential conflict between the agent and shareholders in the interest. It is shown that ownership is separated from management. This cause not only is the divergence of ownership and control, but also the information is asymmetrical. When ownership is separated
Economic science teaches us that due to their subjective needs, individuals have subjective preferences, and hence different interest. Occasionally different subjective interests give rise to conflicts of interest between contracting partners. These conflicts of interest may result in turn, in one or both parties undertaking actions that may be against the interest of the other contracting partner. The primary reason for the divergence of objectives between managers and shareholders has been attributed to separation of ownership (shareholders) and control (management) in corporations. As a consequence, agency problems
As explained by Schelker (2013), the agency problem between the owners and the management of a firm is at the heart of the corporate governance literature. Hence, there is a need for a
“The approach of the how international joint venture makes, it would to ready us to determine how we can achieve the commercial objective without the compromising the shareholder interests. We need to be understanding of this relationship between the Cooperate and capital control, implication of accounting, for achieving the vote right we need to how many percentage minimum. Some aspect of regarding debt, alternative of capital contribution.