What is the principal-agent problem

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Question 1) How does the U.S. differ from other countries with respect to the source of funding for nonfinancial business?

Question 2) What are economies of scale in financial transactions? How can financial intermediaries achieve these economies?

Question 3) Distinguish between adverse selection and moral hazard.

Question 4) What facts about financial structure can be explained by adverse selection?

Question 5) What factors usually cause an increase in adverse selection?

Question 6) What is the principal-agent problem?

Question 7) What is the free-rider problem? Describe some situations that this problem creates.

Question 8) What facts about financial structure can be explained by moral hazard?

Question 9) What factors usually cause an increase in moral hazard?

Question 10) Why is the use of collateral to obtain a loan difficult for the poor in developing countries?

Question 11) Why should we be concerned about conflicts of interest in the financial services industry?

Question 12) What conflicts of interest can arise in investment banking?

Question 13) What conflicts of interest can arise in accounting firms?

Question 14) What conflicts of interest can arise in credit-rating agencies?

Question 15) Evaluate the major provisions of Sarbanes-Oxley and the Global Legal Settlement as remedies for conflict of interest problems.

Question 16) What issues do critics cite when discussing why Sarbanes-Oxley has led to a decline in U.S. capital markets?

Reference no: EM132455736

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