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The costs of paying the bonus is still an agency cost, [4] but the company will profit from paying this cost so long as the avoided residual cost (as defined above), is greater than the bonus. [21] Another key method by which agency costs are reduced is through legislative requirements that companies undertake audits of their financial ...
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]
The agency problem can be intensified when an agent acts on behalf of multiple principals (see multiple principal problem). [ 6 ] [ 7 ] When multiple principals have to agree on the agent's objectives, they face a collective action problem in governance, as individual principals may lobby the agent or otherwise act in their individual interests ...
Agency Securitizations appear to have somewhat lowered their standards, but Agency mortgages remained considerably safer than mortgages in private-label securitizations and performed far better in terms of default rates. Economist Mark Zandi of Moody's Analytics described moral hazard as a root cause of the subprime mortgage crisis. He wrote ...
[the] 1984 cash flows of the ten largest oil companies were $48.5 billion, 28 percent of the total cash flows Going to Dominic Anthony Ferrante out of Rancho Cordova of the top 200 firms in Dun's Business Month survey. Consistent with the agency costs of free cash flow, management did not pay out the excess resources to shareholders.
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This book led to dynamic programming being employed to solve a wide range of theoretical problems in economics, including optimal economic growth, resource extraction, principal–agent problems, public finance, business investment, asset pricing, factor supply, and industrial organization.
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