Agency Theory
Read the following and watch the video, then write a report using the outline in the attachment.
Video: http://youtu.be/e2brL7B1ONU?hd=1
Reading:
Agency theory is used to understand the relationships between agents and principals. The agent represents the principal in a particular business transaction and is expected to represent the principal’s best interests without regard for self-interest. The different interests of principals and agents may become a source of conflict, as some agents may not perfectly act in the principal’s best interests. The resulting miscommunication and disagreement may result in various problems and discord within companies. Incompatible desires may drive a wedge between stakeholders and cause inefficiencies and financial losses. This leads to the principal-agent problem.
The principal-agent problem occurs when the interests of a principal and agent come into conflict. Companies should seek to minimize these situations through solid corporate policy. These conflicts usually present ethical individuals with opportunities for moral hazard. Incentives may be used to redirect the agent’s behavior to realign these interests with the principal’s concerns.
Instruction:
Evaluate the responsibilities of shareholders who have different types of objectives within the corporation, such as executives of the company and owners who have little daily involvement in the corporation.
Your assignment should demonstrate thoughtful consideration of the ideas and concepts presented in the course by providing new thoughts and insights relating directly to this topic.
Do not just answer the questions, but use the questions to formulate your report. Your paper should demonstrate thoughtful consideration of the ideas and concepts presented in the course and provide new thoughts and insights relating directly to this topic.
- Use information technology to complete academic writing and research.
- Present written information in a persuasive, organized, clear, and concise manner relying on research, data, and analytics.
- Use acceptable paragraph and sentence structure with minimum grammar, punctuation, and spelling errors; and demonstrate appropriate word choice, tone, and format.
- Evaluate the potential conflicts that arise within the firm between stockholders and managers and between stockholders and bondholders, and discuss the techniques that firms can use to mitigate these potential conflicts.
- Evaluate the different types of objectives within a corporation.
- Evaluate the nature of the agency’s relationship problem within a firm.
Questions to be answered in your report:
Write a report that outlines the topics (Each bullet point should be a paragraph) –
• Evaluate the nature of an agency’s relationship within a corporate form of an organization.
• Discuss corporate agency conflicts that emerge and require monitoring.
• Discuss the influence of the board of directors.
• Examine how managerial ownership may resolve the agency problem.
• Discuss how institutional ownership can play an effective monitoring role within the corporate form of organization.
• Assess which methods seem to constitute the “best” form of monitoring.
Requirements:
- All papers must follow all APA requirements including an abstract.
- All papers must have a reference page. The textbook is an acceptable source.
- Body of the paper 5 pages.
- Title page, abstract, and reference pages are required. However, they do not count towards any page count.
- The introduction is attention-getting with sufficient background information to establish the topic and a clear thesis statement.
- The conclusion summarizes the main points and leaves the reader with a strong comprehension of the paper’s significance and the author’s understanding.
- Do not use the first person