Agency problem

Agency Problem
Agency Problem definition :
Conflicts of interest among stockholders, bondholders, and managers.
What's A Spread?

Agency problem
The conflict of interest between principal (e.g. shareholders) and agent (e.g. managers) in which agents have an incentive to act in their own self-interest because they bear less than the total costs of their actions. ...

agency problems
Conflicts of interest between the firm's owners and managers.
Related Terms: ...

Agency problem
Also sometimes referred to as the principal-agent problem.

AGENCY PROBLEM - Conflicts of interest among stockholders, bondholders, and managers.
AGENCY SECURITIES - Securities issued by federally related institutions and U.S. government-sponsored e...

An agency problem where a company refuses to invest in low-risk assets, in order to maximize their wealth at the cost of the debt holders.

Firms typically adopt a number of internal control and incentive mechanisms that can mitigate the agency problem. Bonuses and stock options, in addition to ownership stakes, tie the managers' compensation to the performance of the firm.

Shareholders still controlled corporations, and the agency problem was a matter of managers not exercising "anxious vigilance.

Underinvestment Problem - An agency problem where a company refuses to invest in low-risk assets, in order to maximize their wealth at the cost of the debt holders.

Limited liability also creates an agency problem by creating a conflict of interest between shareholders and debt holders. Shareholders can, in effect, walk away from a failed company, leaving creditors with its assets.

La Porta, R. et al. (2000), "Agency Problems and Dividend Policies around the World," Journal of Finance, Vol. 55 (1), 305-360 ...

payments are guaranteed by government agencies, such as the Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), and Federal National Mortgage Association(Fannie Mae).
Agency problem ...

See also: Expense, Agency costs, Banks, Administration, Cost of capital