Search results
Results from the WOW.Com Content Network
An agency cost is an economic concept that refers to the costs associated with the relationship between a "principal" (an organization, person or group of persons), and an "agent". The agent is given powers to make decisions on behalf of the principal.
Milgrom and Roberts (1990) explain the increased cost of management as due to the incentives of employees to provide false information beneficial to themselves, resulting in costs to managers of filtering information, and often the making of decisions without full information. [26] This grows worse with firm size and more layers in the hierarchy.
In economic theory, the principal-agent approach (also called agency theory) is part of the field contract theory. [36] [37] In agency theory, it is typically assumed that complete contracts can be written, an assumption also made in mechanism design theory. Hence, there are no restrictions on the class of feasible contractual arrangements ...
Trade-off theory of capital structure allows bankruptcy cost to exist as an offset to the benefit of using debt as tax shield. It states that there is an advantage to financing with debt, namely, the tax benefits of debt and that there is a cost of financing with debt the bankruptcy costs and the financial distress costs of debt. [ 24 ]
Managerial economists define managerial economics in several ways: It is the application of economic theory and methodology in business management practice. Focus on business efficiency. Defined as "combining economic theory with business practice to facilitate management's decision-making and forward-looking planning."
The basic theorem states that in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the enterprise value of a firm is unaffected by how that firm is financed. [2] [unreliable source?] This is not to be confused with the value of the equity of the firm.
The multiple principal problem, also known as the common agency problem, the multiple accountabilities problem, or the problem of serving two masters, is an extension of the principal-agent problem that explains problems that can occur when one person or entity acts on behalf of multiple other persons or entities. [1]
Management is a type of labor with a special role of coordinating the activities of inputs and carrying out the contracts agreed among inputs, all of which can be characterized as "decision making". [1] Managers usually face disciplinary forces by making themselves irreplaceable in a way that the company would lose without them.