finance class 2

finance class 2 - Lecture Outline Lecture 2 Lecture...

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Lecture Outline Lecture 2 Lecture Organization What is Corporate Finance The Goal of Financial Manager The Agency Problem
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A Simplified Organizational Chart
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The Goal of Financial Management What are firm decision-makers hired to do? Possible goals of financial management?
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The Goal of Financial Management Equivalent goals of financial management:
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The Agency Problem The agency relationship is the relationship between principal (shareholders) who pays agent (management) to represent them Will managers work in the shareholders’ best interests? They are suppose to but they don’t always
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The Agency Problem Agency costs is conflicts of interest between the parties: between shareholders and managers Management goals (may differ from the goals of shareholders): safe job, excessive perks better pay Less efforts
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The Agency Problem Examples of Management actions that don’t benefit shareholders: make the firm bigger, although less effective
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finance class 2 - Lecture Outline Lecture 2 Lecture...

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