Deadline Today at 09:00 PR Score:110 1. Overview of Financial Management: Agency

Question

Deadline Today at 09:00 PR Score:110 1. Overview of Financial Management: Agency Conflicts Agency Conflicts Fims must previde the nght incentives if they are to get eict to focous on long-run value maximization. Conficts exist between managers and stoskholders and between stockholders (epresnted by managers) and Managers personal goals may compete with shareholder weaith maximization. However, managers can be mobvated to act in their stockholders' best interests through (1) reasonableSeet packages (2) firing managers, and (3) the threat of hostle takeovers. It a frm's stock is undervalued, corperate raiders witlse it as a bargain and well attemet to capture the tem n generally receive fiwed payments repardiess of how the frm does, while Selecteam bigher retums when the frm's earnings are o higher. 3nvestments in Seeventurnes, mat have great payots t additional Serectincreases stockholider/debeholder actions conficts. Consequently, bondholders attemet to stockholders it successful but threaten bankruptey they fai, create conflicts. In addtion, the use of by including Seltn bond agreements that limit fhimst use of adational Seand constrainSelet Copyright NobicesTerms of Ue Privacy NoticeSecurity Notice Accessbility 20 7 8 9 6 3 4

Explanation / Answer

Ans 1) managers

Ans 2) debtholders

Ans 3) Reasonable Compensation Packages

2nd Para

Ans 1) Bondholders

Ans 2) Stockholders

Ans 3) Risky

Ans 4) debt

Ans 5) Covenants

Ans 6) Debt

Ans 7) Managers

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