PrinciplesofFinance

PrinciplesofFinance - 1 Compensation 2 Intervention by...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Principles of Finance FINC 3630 Yost Principles of Finance The Goal of the Firm What is the goal of the firm? What does it mean? Why should we do it? Is it short sighted? What about other goals? Corporate Structure Shareholders Directors Managers
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Principles of Finance FINC 3630 Yost Agency Conflicts What is an agency relationship? Why do agency problems occur? Shareholders vs. Managers Shareholders vs. Creditors Agency Problems: Shareholders vs. Managers Perquisites Shareholders incur agency cost Shareholders incur agency costs 1. Costs to monitor 2. Costs to structure the organization 3. Opportunity costs of limiting managers’ actions Agency Problems: Shareholders vs. Managers Ways to reduce potential agency problems:
Background image of page 2
Background image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1. Compensation 2. Intervention by shareholders 3. Threat of firing 4. Threat of hostile takeovers Principles of Finance FINC 3630 ‐ Yost Agency Problems: Shareholders vs. Creditors • Example: Increase riskiness of firm by changing capital structure or changing risk of assets/investments. • Result: • Should a firm do this? Why or why not? Transparency • Our financial system is dependent upon ________________________________. • This includes: – GAAP – Audits of financial statements – Filing financial statements with the SEC – Release of information to ALL investors – Sarbanes ‐ Oxley Suggested Problems • Questions: – 1 ‐ 2, 1 ‐ 4, 1 ‐ 6, and 1 ‐ 7...
View Full Document

This note was uploaded on 12/11/2011 for the course FINC 3630 taught by Professor Jensen,m during the Summer '08 term at Auburn University.

Page1 / 3

PrinciplesofFinance - 1 Compensation 2 Intervention by...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online