Contracting cost - agency costs, Finance Basics

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Contracting Cost - Agency Costs

These are costs acquired in devising the contract between the shareholders and managers.

The contract is drawn to ensure management act in the excellent interest of shareholders and the shareholders conversely undertake to compensate the management with their effort.

Examples of the costs are as:

Negotiation fees
The contracts fee the legal costs of drawing.
The costs of background the performance standard.

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