Fundamentals of Corporate Finance (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
4th Edition
ISBN: 9780134475561
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Question
Chapter 1, Problem 13P
Summary Introduction
Corporation:
A corporation is a separate legal entity which is separate from its owners. It is an artificial body and continues to exist even after the death of its owners where in such case the ownership is transferred. The owners are separate from the legal body and hence they are not liable for any obligation of the corporation individually. Similarly, the corporation is also not liable for any of the personal obligations of its owners.
Agency Problem
Agency problem happens in a corporation where the ownership of the firm and the control are in two different hands. It is a situation in which there is a conflict of interest between the manager and shareholders of a company. The managers are hired to make decisions on behalf of the shareholders but the managers take decisions that favor their interest instead of the shareholders. This is known as the agency problem that often happens in corporations.
To Identify:
The nature of the agency conflict in the given question and the way it is related to ethical considerations.
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Chapter 1 Solutions
Fundamentals of Corporate Finance (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
Ch. 1 - Prob. 1CCCh. 1 - Prob. 2CCCh. 1 - Prob. 3CCCh. 1 - Prob. 4CCCh. 1 - Prob. 5CCCh. 1 - Prob. 6CCCh. 1 - Prob. 7CCCh. 1 - Prob. 8CCCh. 1 - What are the important changes that have occurred...Ch. 1 - What is the basic financial cycle?
Ch. 1 - What are the three main roles financial...Ch. 1 - Prob. 1PCh. 1 - What does the phrase limited liability mean in a...Ch. 1 - Prob. 3PCh. 1 - Prob. 4PCh. 1 - Prob. 5PCh. 1 - You are a shareholder in a C corporation. The...Ch. 1 - Prob. 7PCh. 1 - Prob. 8PCh. 1 - Prob. 9PCh. 1 - Prob. 10PCh. 1 - Prob. 11PCh. 1 - Suppose you are considering renting an apartment....Ch. 1 - Prob. 13PCh. 1 - You are a financial manager in a public...Ch. 1 - You sit on the board of a public corporation. Your...Ch. 1 - What is the difference between a public and a...Ch. 1 - What is the difference between a primary and a...Ch. 1 - How are limit orders and market orders different?Ch. 1 - Explain why the bid-ask spread is a transaction...Ch. 1 - What are the tradeoffs in using a dark pool?Ch. 1 - Prob. 21PCh. 1 - What is the financial cycle?Ch. 1 - Prob. 23PCh. 1 - Prob. 24PCh. 1 - Prob. 25P
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