Agency theory - finance, Finance Basics

Assignment Help:

Agency Theory

The agency problem between managers and shareholders can be resolved via paying high dividends. If retention is low, managers are necessary to increase additional equity capital to finance investment. Each fresh equity matter will expose the managers financing decision to providers of capital as like bankers, suppliers, investors and so on. Managers will so engage in activities such are consistent along with maximization of shareholders wealth with making full disclosure of their activities.

This is since they know the firm will be exposed to external parties during external borrowing. Thus, Agency costs will be reduced as the firm becomes self-regulating. Dividend policy will contain a beneficial effect on the value of the firm. This is since dividend policy can be used to decrease agency problem with decreasing agency costs. The theory implies about firms adopting high dividend payout ratio will contain a higher because of decreased agency costs.


Related Discussions:- Agency theory - finance

Trial and error method, Trial and Error Method a) Select any rate of i...

Trial and Error Method a) Select any rate of interest on random and employ it to compute NPV of cash inflows. b) If rate selected produces NPV lower than the cost, want a l

Measuring business performance, Measuring Business Performance Defini...

Measuring Business Performance Definition Financial analysis is a process via that finance identifies the company's financial performances with comparing the entities in

Specific cost, I need a report on Specific Cost. Can you please assist me f...

I need a report on Specific Cost. Can you please assist me for Specific Cost report for about 2500 words?

Evaluating financial statements, WHat are the expected rates of reimburseme...

WHat are the expected rates of reimbursement for this time frame for each player ?

Determine the net present value and internal rate, Berick Ltd is a relative...

Berick Ltd is a relatively small engineering company that manages to compete effectively with larger companies by adapting to changing market requirements and specialising in innov

Basic economic order quantity model , Basic economic order quantity (EOQ) m...

Basic economic order quantity (EOQ) model  This model is one of the oldest and most commonly used in inventory control. It is based on a number of assumptions:  The dem

Determine tax cash flows & irr, An industrial engineer proposed the purchas...

An industrial engineer proposed the purchase of a RFID Fixed Asset Tracking System for the company's warehouse and weave rooms.  The engineer though that the system would provide a

Conservative approach - financing current assets, Conservative Approach - F...

Conservative Approach - Financing Current Assets An exact similar of asset life along with the life of the funds required to finance the asset may not be possible. A firm that

Public expenditure, what is the importance of public expenditure

what is the importance of public expenditure

Revenue Reserves - Retained Earnings, Revenue Reserves - Retained Earnings ...

Revenue Reserves - Retained Earnings These are undistributed earnings.  Those reserves are retained for the given reasons like: A. To create up for the fall in profits so a

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd