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key term chapter 1 - Omar M Al Nasser Ph.D MBA Visiting...

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1 | P a g e Omar M. Al Nasser, Ph.D., MBA. Visiting Assistant Professor of Finance School of Business Administration University of Houston-Victoria Email: [email protected] Glossary Chapter 1 agency cost or problem An expense, either direct or indirect, that is borne by a principal as a result of having delegated authority to an agent. An example is the costs borne by shareholders to encourage managers to maximize a firm’s stock price rather than act in their own self-interests. These costs may also arise from lost efficiency and the expense of monitoring management to ensure that debtholders’ rights are protected. Employee Retirement Income Security Act (ERISA) The basic federal law governing the structure and administration of corporate pension plans. equilibrium The condition under which the intrinsic value of a security is equal to its price; also, its expected return is equal to its required return.
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