The term “agency relationship”. Introduction: Agency problem arises due to the likelihood of conflicts of interests between the stockholders and the management of a firm. Generally, the financial manager takes decisions according to interests of the majority. However, in larger corporations it is difficult to fulfil the wishes of the stockholders.

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Chapter 1.4, Problem 1.4ACQ

Summary Introduction

To discuss: The term “agency relationship”.

Introduction:

Agency problem arises due to the likelihood of conflicts of interests between the stockholders and the management of a firm.

Generally, the financial manager takes decisions according to interests of the majority. However, in larger corporations it is difficult to fulfil the wishes of the stockholders.

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