Incentive problem and consumption of perquisites, Finance Basics

Incentive Problem and Consumption of Perquisites

Incentive Problem

Managers may have fixed salary and they may have no incentive to work hard and maximize shareholders wealth. It is as irrespective of the profits they make, their reward is set. Therefore they will maximize leisure and work less that is against the interest of the shareholders.

Consumption of "Perquisites"

Prerequisites consider to the high salaries and generous fringe benefits such the directors might award themselves. This will comprise director's remuneration that will shrink the dividends paid to the usual shareholders. Consequently the consumption of perquisites is against the interest of shareholders while it shrinks their wealth.

Posted Date: 1/29/2013 1:25:42 AM | Location : United States







Related Discussions:- Incentive problem and consumption of perquisites, Assignment Help, Ask Question on Incentive problem and consumption of perquisites, Get Answer, Expert's Help, Incentive problem and consumption of perquisites Discussions

Write discussion on Incentive problem and consumption of perquisites
Your posts are moderated
Related Questions
Solutions - Shareholders and Management Conflict Conflicts between management and shareholders may be resolved as follows like: 1. Pegging or attaching managerial compens

Example of Valuation of Bonds and Debentures K is contemplating purchasing a 3 year bond worth 40,000/= carrying a nominal coupon rate of interest of 10 percent.  K necessary

Tax Differential Theory Advanced via Lichtenberger and Ramaswamy in 1979.They argued that tax rate on dividends is higher quite than tax rate on capital gains. Thus, a firm th

Important points for Working Capital Cycle A lengthy working capital cycle is a sign of poor management of debtors and stock reflecting low turnover of debtors and stock and l

Application of Discriminant Analysis Application of Discriminant Analysis to the Selection of Applicants, Discriminative analysis is a statistical model such can be used to ac

Advantages of Using Debt Finance Interest on debt is a tax permit able expense and as that it is reduced via the tax allowance. The cost of debt is fixed regardless of

Conditions under which Loans Are Ideal a) Whenever the company's gearing level is low as the level of outstanding loans is low. b) The company's future cash flows as inflows

Which depreciation method would produce the higher NPV and how much higher would it be?

What is the need for documents in international business? Substantiate your answer with suitable examples.

Question: A non-zero coupon bond carries a coupon rate of 8 percent and has 9 years until maturity. It sells at a yield to maturity of 6 percent. The par value of the bond is