Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Question
Chapter 10, Problem 2Q
Summary Introduction
To discuss: Possible agency conflict between managers/ inside owners and outside shareholders.
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What is the possible agency conflict between inside owner/managers andoutside shareholders?
What are the conflicts between shareholders and managers?
What is an agent, and what is a principal? Whatkinds of situations in companies give rise to conflicts between these two, called agency conflicts?
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- Explain the term “agency relationships” and discuss the conflicts that might exist in the relationship between’i) Shareholder and managersii) Shareholders and creditorsWhat steps may be taken to overcome these conflicts?arrow_forwardAgency problem arises due to the divergence or divorce of interest between the principal and the agent. Discuss shareholders-management agency relationship, conflict and resolutionarrow_forwardHow do you resolve conflict of interest in an organization?arrow_forward
- Which statement best describes the essence of the Agency Problem? Shareholders allocate decision-making authority to the managers, who might act dishonestly or guard their own self-interest. Managers and shareholders always have aligned interests and goals. Managers always act in the best interest of shareholders. Shareholders retain all decision-making authority.arrow_forwardA According to shankman(1999), two features make agency relations special. One of this is inherent conflict of interest between shareholders and managers. What is the other? a- limited communication between owners and managers b- large difference in defined rights and obligations c- informational asymmetry between principal and agents d- short term focus of the ownership goalsarrow_forwardAgency cost arise from the senior management's inability to control shareholder true or False. Statearrow_forward
- What is the concept of apparent authority? Give an example of how it might crop up in the business environment.arrow_forwardWhat actions that shareholders can take to ensure that management’s and shareholders’ interests are aligned? Explain.arrow_forwardWhat actions that shareholders can take to ensure that management's andshareholders' interests are aligned? Discuss.arrow_forward
- Which of the following is not part of the definition of internal control? Separation of duties Safeguard assets Encourage employees to follow company policies Promote operational efficiencyarrow_forwardWhich of the following does not help align managerial and shareholder incentives? Question options: a) Market for Corporate Control b) Product Market Competition c) Antitrust Law d) Corporate Law e) Markets for Directorsarrow_forwardAny situation where a potential conflict can arise between the firm's owners and its managers is referred to as a(n): Group of answer choices organisational problem. compensation issue. agency problem. personnel conflict. control issue.arrow_forward
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