The principal and agent problem arises when the interests of both principal and agent are in conflict. The agents are hired by the principal to act on behalf of the principal for his best interest. In Corporate setup, the principal-agent relationship is very common.
Shareholders are the owners and hire a CEO for a company to operate in the best interest of the shareholders. The problem arises when the CEO is not acting as the shareholders want. For example, shareholders want cash dividends instead of a stock dividend, but CEO thinks that cash is required for short-term investments and for working capital investments.
Harte Systems Inc., a maker of electronic surveillance equipment, is
Miller Corporation is considering replacing a machine. The replacement will reduce
Matt Peters wishes to evaluate the risk and return behaviors associated with
Bluestone Metals Inc. is a metal fabrication firm that manufactures prefabricated
Lincoln Industries has a line of credit at Bank Two that requires
Samuels Manufacturing is considering the purchase of a new machine to replace
Bristol’s Bistro, Inc., has declared a dividend of $1
Gabrielle just won $2.5 million in the state lottery
Gina Vitale has just contracted to sell a small parcel of land
You have been made treasurer for a day at AIMCO, which
