Information asymmetry Essays & Research Papers

Best Information asymmetry Essays

  • The Effects of Information Asymmetry - 1564 Words
    The Effects of Information Asymmetry Information asymmetry is a universal phenomenon in the trading market. The seller often knows more about the product’s quality than the buyer. In the labour market, the job applicant knows much more about how qualified they are than the potential employer. People who buy insurance often have a much better understanding of their risks than the insurance company which is selling them insurance. These kinds of cases lead to several kinds of problems. These...
    1,564 Words | 5 Pages
  • Asymmetric Information. - 1399 Words
     Presentation Number 8 ROLL NO.26 ASYMMETRIC INFORMATION: Asymmetric Information can be defined as "information that is known to one party in a transaction but no to the other party". The classified argument is that some sellers with inside information about the quality of an asset will be unwilling to accept the terms offered by a less informed buyer. This may cause the market breakdown or at a price lower than...
    1,399 Words | 4 Pages
    Economics, Management, and Financial Markets Volume 6(2), 2011, pp. 188–193, ISSN 1842-3191 THE ROLE OF ACCOUNTING INFORMATION IN DECISION-MAKING STRATEGIES AND PROCESSES OVIDIA DOINEA GHEORGHE LEPĂDAT VASILE TOMIŢĂ IONELA DĂNIASA University of Craiova ABSTRACT. The paper generates insights about the linkages between the exploitation of inside information on capital markets, the integration of organizational...
    2,205 Words | 8 Pages
  • Bounded Rationality, Private Information, Moral Hazard and Performance Incentive
    Bounded Rationality, Private Information, Moral Hazard and Performance Incentives [A Summarized Reconstruction of Chapters 5 and 6 of Economics, Organization and Management (1992, Prentice Hall) by Paul Milgrom and John Roberts] Prepared By: Rajib Sarkar 11th January 2012 Introduction Firms exist to coordinate and motivate the economic activities of a set of interconnected individuals. When individuals specialize in their production activities (the...
    6,467 Words | 17 Pages
  • All Information asymmetry Essays

  • Asymmetric information and moral hazard are important concepts in understanding the evolution of financial markets
    Asymmetric information and moral hazard are important concepts in understanding the evolution of financial markets Name: Qiwei Sun When we consider the evolution of financial markets, information is the thing that we must pay much attention to deal with. Asymmetric information and moral hazard, the two important concepts, are playing key roles in the information system. Both of them could hinder the development of financial markets. So, in order to make the financial markets developing much...
    736 Words | 2 Pages
  • Introduction to Finance - 1779 Words
    [SEGI COLLEGE KL] | [Introduction to Finance] Student Particulars Name | | NIRSHEILA SHAM KAUR A/P SHAMSHER SINGH | IC Number | | 890909-14-6640 | Student Number | | SC-KL-00037505 | Course | | EXECUTIVE DIPLOMA IN BUSINESS ADMINISTRATION | Subject Title | | Introduction to Finance | Subject Code | | | Mode of Study | | Full-Time Part-Time Independent Learning E-Learning | Name of Lecturer | | Mr Terrence Tan | Due Date | | 20/02/2013 |...
    1,779 Words | 5 Pages
  • Moral hazard Assignment - 1079 Words
     Corban University Moral Hazard Assignment Jessica Leon 11/2/14 Moral hazard, as defined by Zhang (2013) “refers to the problem or risk that one party of an interaction may be taken advantage of by another party due to interest conflict and information asymmetry between the involved parties.” Information asymmetry is characterized by Sufi (2010) as A situation in which one party in a transaction has more or superior information compared to another....
    1,079 Words | 4 Pages
  • Remuneration Policy - 1474 Words
    ‘There is too much accounting regulation’. In order to address this comment, this essay will focus on how theories of regulation apply to accounting practices and the necessity of accounting regulation. First of all, according to Oxford Dictionaries, accounting means ‘the process or work of keeping financial accounts’. While regulation is ‘a rule or directive made and maintained by an authority’. (Oxford Dictionaries 2013) Since long ago the necessity of accounting regulation has been keep...
    1,474 Words | 5 Pages
  • xtcfjgkvhlb - 971 Words
    University of Phoenix Material Definitions Define the following terms using your text or other resources. Cite all resources consistent with APA guidelines. Term Definition Resource you used Time value of money The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is...
    971 Words | 4 Pages
  • Genzyme - 366 Words
    Case: Genzyme Corporation Problem: High equity financing company Genzyme has a tradition to be financed with equity. High equity ratio has advantages such as low agency costs related to debt, lower financial stress and more flexibility for management, which is especially crucial for start-up companies, such as in the early stage of Genzyme. However, besides losing the tax shield from debt, high equity financing leads to an increasingly diffused ownership, which would in turn causes problems...
    366 Words | 2 Pages
  • Principal Agent Theory - 3376 Words
    The Principal Agent-Theory as a base for the organization of company innovation process There are many settings in which one economic actor (the principal) delegates authority and/or responsibilities to an agent to act on his behalf. The primary reason for doing so is that the agent has an advantage in terms of expertise or information. This informational advantage, or information asymmetry, poses a problem for the principal—how can the principal be sure that the agent has in fact acted in...
    3,376 Words | 11 Pages
  • Expatriates and Corporate Level - 9439 Words
    The current issue and full text archive of this journal is available at MD 45,3 Expatriates and corporate-level international strategy: governing with the knowledge contract Brian Connelly and Michael A. Hitt Texas A&M University, College Station, Texas, USA 564 Angelo S. DeNisi Freeman School of Business, Tulane University, New Orleans, Louisiana, USA, and R. Duane Ireland Texas A&M University, College Station, Texas, USA Abstract...
    9,439 Words | 29 Pages
  • Ch01 - 1766 Words
    Scott, Financial Accounting Theory, 7th Edition Instructor’s Solutions Manual Chapter 1 CHAPTER 1 INTRODUCTION 1.1 The Objective of This Book 1.2 Some Historical Perspective 1.3 The 2007-2008 Market Meltdowns 1.4 Efficient Contracting 1.5 A Note on Ethical Behaviour 1.6 Rules-Based v. Principles-Based Accounting Standards 1.7 The Complexity of Information in Financial Accounting and Reporting 1.8 The Role of Accounting Research 1.9 The Importance of Information Asymmetry 1.10...
    1,766 Words | 8 Pages
  • What Is the Principle-Agent Relationship? Using Examples from the Public Sector Explain Why Inefficiencies May (or May Not) Arise Because of a Principle-Agent Relationship. Is There a Way to Resolve Any Problems?
    A great majority of social and economic relationships are of the principle agent type. The principle-agent problem is a game-theoretic situation where; there is a player (the principal) and one more other players (the agents). This is the problem of how the principle can motivate the agent to act for the principles benefit rather than follow self interest. “The problem is how to devise incentives which lead to report truthfully to the principle on the facts they face and the actions they...
    1,558 Words | 5 Pages
  • Regulation of Financial Accounting and Reporting: the Pro-Regulation Perspective
    Regulation is defined as a set of rules that is designed to control and govern conduct by authority (Deegan 2009, p.59). On the basis of this definition, Deegan (2009, p.59) has defined regulations relating to financial accounting as rules that are developed by independent authoritative body to govern the preparation of financial statements which are accounting standards. Since decades ago, there have been arguments for and against the existence of accounting regulations. With a stance of...
    1,247 Words | 4 Pages
  • Visionary Design Systems Essay
    Introduction This memorandum addresses our recommendation for Product Data Management and Visionary Design System employees. First, it states the principal and agent relationships. Second, it addresses the sources of problems with PDM. Third, it discusses solutions and recommendations for PDM and VDS employees. Finally, it discusses other organizational changes and concludes with a summary of our recommendations. Principal-Agent Relationships The PDM software provides organizational...
    724 Words | 3 Pages
  • Lemon problem - 593 Words
    Often the people or firms on one side of an economic transaction know more than those on the other side.This information asymmetry leads to adverse selection: among the informed parties, those who are most eager to make a deal are the least desirable to parties on the other side.Adverse selec- tion is a big idea in economic theory, because the problem arises in many types of markets. The Lemons Problem In 1970, George Akerlof of the University of California, Berkeley, published the classic...
    593 Words | 2 Pages
  • Agency theory - 37490 Words
    Agency Theory and Its Consequences A study of the unintended effect of Agency Theory on Risk and Morality M.Sc. FSM Master Thesis: Agency Theory & Its Consequences Master Thesis at Copenhagen Business School Student: Thomas Rüdiger Smith Programme: M.Sc Finance & Strategic Management Advisor: Sven Junghagen, Department of Management Politics & Philosophy August, 2011 Total Pages: 78 (133 with appendix and summary) Characters: 181647 (246486 with appendix and summary) Thomas...
    37,490 Words | 405 Pages
  • Mcdonalds Financial Analysis - 654 Words
    Moral Hazards in Healthcare MORAL HAZARDS IN HEALTHCARE Lizceth Zazueta Brandman University Professor Judy Justice Macro Economics 202 Moral is defined by as pertaining to, or concerned with the principles or rules of right conduct or the distinction between right and wrong. People have different understandings of what is right and what is wrong. Morals are something that comes into play in our daily lives. How does this relate to healthcare and how can there be moral...
    654 Words | 2 Pages
  • The Difference Between Adverse Selection and Moral Hazard.
    In your own words, discuss the difference between adverse selection and moral hazard. Provide your own example for each problem. Adverse selection and moral hazard are both examples of market failure situation due to hidden information from the buyer or seller in a market. In adverse selection, hidden information is usually present before an agreement is made; where as, in moral hazard, hidden information is revealed after an agreement has been made. Adverse selection refers to a...
    376 Words | 1 Page
  • Hello World - 18274 Words
    Signaling and risk allocation in merger agreements Antonio J. Macias* Thomas Moeller** Abstract Acquirers and targets allocate interim risk in merger agreements through Material Adverse Change (MAC) clauses and exclusions. While virtually all acquisitions have MAC clauses, there is broad cross-sectional variation in the number and type of MAC exclusions. Using comprehensive hand-collected data, we find that acquisitions with fewer firm-specific MAC exclusions, i.e., stronger abandonment...
    18,274 Words | 54 Pages
  • A conceptual note on the modes of termination of agency - Indian Contract Act, 1872
    A CONCEPTUAL NOTE ON THE MODES OF TERMINATION OF AGENCY CONTENTS CHAPTER 1: Introduction 1.1 Research Problem 1.2 Literature Review 1.3 Scope and Objectives 1.4 Research Questions 1.5 Research Methodology CHAPTER 2: Modes of termination of agency: A Synopsis CHAPTER 3: Effects of termination of agency: A Discussion CHAPTER 4: Duty of agent on termination of agency CHAPTER 5: Conclusion Bibliography...
    2,816 Words | 10 Pages
  • Week 1 Definitions - 1126 Words
    University of Phoenix Material Definitions Define the following terms using your text or other resources. Cite all resources consistent with APA guidelines. Term Definition Resource you used Time value of money Time value of money refers to the value of money based on its earning potential. Money received today is more highly valued than money received in the future because of the potential to make money on money. i.e. if I were given 100 dollars today I could immediately invest that...
    1,126 Words | 4 Pages
  • Organizational Structure + Principal-Agent Problem
    * Organizational structure + Principal*-Agent problem Principal-Agent Problem There is separation between ownership & control in most of the firm that we see today. As owners, shareholders appoint managers to make decisions for the company. There is another term to describe relationship between them. Shareholders are the PRINCIPAL that appoints the manager (AGENT) to act on the shareholders’ behalf so that profit can be maximize. E.g. Patient-Doctor...
    797 Words | 3 Pages
  • Google Case Write Up - 455 Words
    Google Case Write Up Google has long been seen as a phenomenal company to invest in. Year after year the company continually performs well and gets returns for it investors. This also results in a very high stock price for the company which in recent years has become more volatile. The reason for this was because it periodically missed analyst’s forecasts when it came to items such as EPS. Some believe that because they have a no guidance policy that missing the analyst’s forecasts has the...
    455 Words | 2 Pages
  • Nobel for Lemons - 971 Words
    NOBEL FOR LEMONS * Priya Saxena George A. Akerlof received the Sveriges Riksbank Prize in Economic Sciences in 2001 along with Michael Spence and Joseph Stiglitz for his celebrated work 'The Market for Lemons' (1971) which talks about the implications of the asymmetrical information in the markets where uncertainty is involved. 'Market for Lemons' was written during the time when the then prevailing economic theories were undergoing certain transitions. It was a result of an attempt to...
    971 Words | 3 Pages
  • Capital Structure and Agency Theory
    1.0 Introduction The maximization of the company’s value has long been the objective of financial management. In order to create more value for business organizations, how to comprehensively make the most effective investment, financing and operating decisions becomes more crucial. Among these decisions, the optimization of capital structure has a great influence on the performance of the companies, for a reasonable capital structure can decrease the financing cost, take advantage of the...
    2,798 Words | 9 Pages
  • Financial Accounting - 3485 Words
    This essay is to critically evaluate the usefulness of the accounting theory to practicing accountants today. It will provide a general assessment of information asymmetry and the fundamental problem of accounting, and it will also briefly discuss the normative and positive accounting theories and their usefulness to practicing accountants. After those discussions, it will specifically discuss the strength and limitation of positive accounting theory and assess its usefulness to practicing...
    3,485 Words | 10 Pages
  • Finance - 18742 Words
    JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS doi:10.1017/S0022109009990299 Vol. 44, No. 5, Oct. 2009, pp. 1045–1079 COPYRIGHT 2009, MICHAEL G. FOSTER SCHOOL OF BUSINESS, UNIVERSITY OF WASHINGTON, SEATTLE, WA 98195 Management Quality, Financial and Investment Policies, and Asymmetric Information Thomas J. Chemmanur, Imants Paeglis, and Karen Simonyan ∗ Abstract We develop measures of the management quality of firms and make use of a unique sample of hand-collected data to examine...
    18,742 Words | 55 Pages
  • The Role of Conservatism in Financial Reporting
    The Role of Conservatism in Financial Reporting Table of Contents Introduction 3 Applications of Conservatism in Accounting 4 Advantages associated with Conservatism 7 Disadvantages associated with Conservatism 11 Recommendations and conclusions 14 References 17 Introduction This report investigates the application of conservatism in accounting and its role in financial reporting. We also examine and compare the advantages and disadvantages associated with conservatism and...
    3,906 Words | 12 Pages
  • ECO 550 Week 8 Discussion Question
    This week’s Scenario examines a merger strategy for Katrina’s Candies. Please respond to the following questions: What is a merger and how is it different from a joint venture as an expansion business strategy? In a merger, two companies become one, and one of the companies often survives while the other disappears. In a joint venture, two companies conspire to achieve a specific goal, such as building a third company, working on an outside project or marketing synergistic services. In a...
    1,641 Words | 3 Pages
  • Principal agent theory - 679 Words
    Separating Theory from Practice By: Coretta Hudson Capella University Principal-agent problem is a particular game-theoretic description of a situation. There is a player called a principal, and one or more other players called agents with utility functions that are in some sense different from the principal's. The principal can act more effectively through the agents than directly, and must construct incentive schemes to get them to behave at least partly...
    679 Words | 3 Pages
  • Pro-Regulation Approach - 365 Words
    Introduction Throughout the years, there have been numerous debates on the necessity of regulation of accounting standards. The two opposing views to setting these standards are one that is based on regulations and the other based on market forces. In this report, we will discuss the supporting views and arguments of both methods and further justify the method that I personally favor. Over the years there have been many arguments and debates over the necessity for regulation. Those who...
    365 Words | 2 Pages
  • Agency Theory - 977 Words
    Agency Theory Agency theory is widely used in different companies, businesses and organizations Agency Theory is basically about the association between the boss, which is the Principal, and the worker, which is the Agent. A good example for an application of the Agency Theory would be sharecropping, where the Principal is the landowner and the Agent is the farmer. Another example for the Agency Theory in a more familiar organizational structure would be the relationship between a company’s...
    977 Words | 3 Pages
  • Accounting Theory - 416 Words
    Moral hazard is a type of information asymmetry whereby one or more parties to a business transaction, or potential transaction, can observe their actions in fulfillment of the transaction but other parties cannot. An information system is a table giving, conditional on each state of nature, the objective probability of each possible financial statement evidence item. Information is evidence that has the potential to affect an individual’s decision. An efficient securities market is one...
    416 Words | 2 Pages
  • Agency Problem Essay 3
    QUESTION 2 INTRODUCTION Agency theory is a model that explicate why performance or judgment differ when display by member of a group. Specifically, it explains the connection between the party, called the principal that delegates work to another, called the agent. It clarify their dissimilarity in performance or judgment by noting that the two parties regularly have different goals and, independent of their respective goals, may have unusual manner toward threat. In another words, it can be...
    918 Words | 3 Pages
  • finance - 887 Words
    one. I was particularly good at mental arithmetic. As quotation-board boy I posted the numbers on the big board in the customers' room. One of the customers usually sat by the ticker and called out the prices. They couldn't come too fast for me. I have always remembered figures. No trouble at all. There were plenty of other employes in that office. Of course I made friends with the other fellows, but the work I , they meant something. They were always changing. It was all I had to be...
    887 Words | 3 Pages
  • Exam of 2011 - 834 Words
    EXAMINATION PAPER Sheet 1 of 6 Code ACFI5006 Session: 2010/11 Faculty of: Business and Law Programme: MSc Accounting & Finance Module: ACFI5006 Level: 5 Subject/Module Title: An Evaluation of Management Accounting Date: Thursday, 27 January 2011 Time Allowed: 3 hrs Start: 12:00 Finish: 15:00 Instructions to, and information for, candidates Students are required to attempt ONE question from each Section. Plus ONE other question from either Section THREE questions in total. All...
    834 Words | 4 Pages
  • Financial markets class ppt
    FINA 3023 Financial Markets & Institutions Class 15 Today s Today’s class The role of financial intermediaries Brokers and dealers Problems in (financial) markets: Asymmetric i f A t i information ti Adverse selection Moral hazard Chapter 8 p 2 The market for “lemons” lemons When, in a market, sellers of a product know more (asymmetric information) about it than the buyers, the market does not function properly. properly “The Market for Lemons: Quality...
    2,993 Words | 19 Pages
  • Agency Theory: an Assessment and Review
    Agency Theory: An Assessment and Review Author(s): Kathleen M. Eisenhardt Source: The Academy of Management Review, Vol. 14, No. 1 (Jan., 1989), pp. 57-74 Published by: Academy of Management Stable URL: Accessed: 14/10/2010 10:43 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at JSTOR's Terms and Conditions of Use provides, in part, that unless...
    9,490 Words | 43 Pages
  • Dimensional Fund Advisors - 616 Words
    Texas A&M University Mays Business School Spring 2013 Professor Yong Chen Case 1: Dimensional Fund Advisors (Harvard Business School Case # 9-203-026) Due Wednesday, March 20 Objectives Subjects covered in the DFA case include efficient markets, models of capital market equilibrium, financial instruments, investment management, tax management, and stock trading. The case promotes an understanding of several important topics in finance. (1) The case introduces many of the...
    616 Words | 3 Pages
  • Review the Video Whistleblower Fired for Exposing Truth/Corrupt Government Contractor and Write a Paper Analyzing How Theory Affects Practice.
    Whistleblower Fired for Exposing Truth/Corrupt Government Contractor By Yolanda Holmes Capella University Abstract Navy performed limited background checks on Thompson and Salvatore Carabetta when project was granted. Shaw Group and Carabetta were feuding during project, company rejected warnings from whistle-blower John Jack, costs escalated and components of houses were downgraded without Navy approval. Navy couldn't get documentation out of American Eagle, Navy didn't act quickly on...
    1,781 Words | 6 Pages
  • Adverse selection versus moral hazard
    Describe either an adverse selection or moral hazard problem a company is facing. What is the source of the asymmetric information? Who is the less-informed party? Are there any wealth-creating transactions not consummated as a result of the asymmetric information? If so, could you consummate them? What advice/recommendations would you give the company? The healthcare debate has been characterized as an argument between those who believe that moral hazard is the primary problem with healthcare...
    402 Words | 2 Pages
  • eco financial markets - 1033 Words
    Part 2. Total 50 marks ( 10 marks each). 1. Explain why you would be more or less willing to buy gold under the following circumstances: a. Gold again becomes acceptable as a medium of exchange. (2 marks) b. Prices in the gold market become more volatile. (2 marks) c. You expect inflation to rise, and gold prices tend to move with the aggregate price level. (3 marks) d. You expect interest rates to rise. (3 marks) Outline of solutions: (a) More, because it has become more...
    1,033 Words | 4 Pages
  • Principal Agent Problem - 941 Words
    One problem in assuming that businesses set price and output to maximise profits is that decision-taking where there is a divorce between ownership and control can be difficult to monitor. How do the owners of a business know that managers making the key day-to-day decisions are operating to maximise shareholder value? This lack of information is known as the principal-agent problem. In other words, one person, the principal, hires an agent (e.g. a sales or finance manager) to perform tasks on...
    941 Words | 3 Pages
  • theories - 3654 Words
    Agency Theory A theory that explains the relationship between principals and agents in business (In this relationship, the principal hires an agent to do the work, or to perform a task the principal is unable or unwilling to do. For example, in corporations, the principals are the shareholders of a company, delegating to the agent i.e. the management of the company, to perform tasks on their behalf.) Agency theory is concerned with resolving problems that can exist in agency...
    3,654 Words | 11 Pages
  • Pos System - 2823 Words My investorism Sept. 1994 investment funds: • financial literacy interactive educating POS thesis IMAGINE • • • • • • if our best financial literacy educators were allowed to decide – were required to decide !! – what optimum consumer / investor point-of-sale financial literacy: educating and empowering, decision facilitating, advisor advice validating, safety protection enhancing, fairer play / field levelling, and governance building...
    2,823 Words | 14 Pages
  • moral hazard - 366 Words
    SUMMARY Moral Hazard in Equity Contracts: The Principal-Agent Problem The separation of ownership and control involves moral hazard, in that the managers (the agents) may act in their own interest rather than in the interest of the stockholder-owners (the principals) because the managers have less incentive to maximize profits than the stockholder-owners do. Tools to Help Solve the Principal-Agent Problem Production of Information: Monitoring Stockholders engage in a particular type of...
    366 Words | 2 Pages
  • Town Of Bellington - 345 Words
    TOWN OF BELLINGTON Exhibit 1. Performance Budget – Snow Removal Department October-December Static Budget Flexible Budget Actual Performance Difference between static budget and actual performance Difference between flexible budget and actual performance Snow days 10 12 12 (2) -- Cubic miles of snow 1,250 1,500 1,500 (250) -- Costs Drivers $18,000 $21,600 $24,675 $(6,675) $(3,075) Supplies 1,125 1,350 1,875 (750) (525) Fuel 1,750 2,100 2,500 (750) (400) Maintenance 1,375 1,650...
    345 Words | 3 Pages
  • Durable Goods Theory For Real World Markets
    Journal of Economic Perspectives—Volume 17, Number 1—Winter 2003—Pages 131–154 Durable Goods Theory for Real World Markets Michael Waldman D urable goods constitute an important part of economic production. In 2000, personal consumption expenditures on durables exceeded $800 billion. In the manufacturing sector in the United States in the year 2000, durable goods production constituted roughly 60 percent of aggregate production. Durable goods pose a number of questions for microeconomic...
    14,071 Words | 46 Pages
  • final - 401 Words
     PPD 501b Final Exam Fall 2012 Answer 3 out of 4 questions (be sure to explain your answers). You have 2.5 hours. 1. Explain the workings of a system of tradable carbon emission permits (cap and trade) in an international setting: a. Explain how the overall emissions cap is set in relation to costs and benefits of greenhouse gas emission reduction. Explain how equity affects how permits are assigned to...
    401 Words | 2 Pages
  • Fin370 R8 Definitions 1
    University of Phoenix Material Definitions Define the following terms using your text or other resources. Cite all resources consistent with APA guidelines. Term Definition Resource you used Time value of money The idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received....
    866 Words | 4 Pages
  • Role of Qatar’s Credit Beauru in Reducing Moral Hazard and Adverse Selection
    Qatar Foundation College of Islamic Studies Term Paper Of: Role of Qatar’s Credit Bureau in Reducing Moral Hazard and Adverse Selection Implications for Islamic Finance Subject: Research Method Spring 2013 Presented to: Prof. Kazem By: Sultan Nayef Althani Student number: 30112018 MSc in Islamic Finance Abstract This paper describes credit bureau and its role in the financial system and it intends to investigate whether Qatar Credit Bureau has minimized the problems of moral...
    3,504 Words | 11 Pages
  • agency problems and its solutions
    Agency problem and its solutions Introduction Principal-agent relationship occurs when a principal contracts an agent. The principal hires the agent to perform a service for him or to act on his behalf. For example, in a large corporation, shareholders would hire managers to help them to organize the company in dairy business. However, agency problems may arise because of the conflict interest and asymmetry information between principals and agents, which lead to agency costs. In this...
    377 Words | 2 Pages
  • Delegated Portfolio Management - 13512 Words
    DELEGATED PORTFOLIO MANAGEMENT: A SURVEY OF THE THEORETICAL LITERATURE Livio Stracca European Central Bank Abstract. This paper provides a selective review of the theoretical literature on delegated portfolio management as a principal–agent relationship. The main focus of the paper is to review the analytical issues raised by the peculiar nature of the delegated portfolio management relationship within the broader class of principal– agent models. In particular, the paper discusses the...
    13,512 Words | 41 Pages
  • “While Shareholders and Managers Will Have Different Objectives, the Extent to Which Managers Will Have Discretion to Pursue Actions That Are Not Consistent with Shareholder Wealth Maximization Is Severely Limited.”
    Managers are hired to act on behalf of the shareholders of a firm. However, this is not always the case as both parties have different objectives. The difference in interests between shareholders and managers ‘derives from the separation of ownership and control in a corporation’ (Berk and DeMarzo, 2011: 921). Whereas shareholders are interested in maximising their own wealth, managers may have more personal interests which differ to that of the shareholders. Downs and Monsen (no date, cited in...
    1,497 Words | 5 Pages