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Need an argumentative essay on Write two summaries of those two articles. Needs to be 4 pages. Please no plagiarism.The concept of ‘agency costs’ pertains as to how the owner of a firm structures
Need an argumentative essay on Write two summaries of those two articles. Needs to be 4 pages. Please no plagiarism.
The concept of ‘agency costs’ pertains as to how the owner of a firm structures and manages the respective incentives and compensations so as to encourage the managers to resort to such decisions, which add to the owners interests, in a monitoring scenario vulnerable to uncertainty and imperfection. The article defines agency costs as the monitoring cost incurred by an owner to restrain a manager from harming one’s interests, the resources spent by the manager to assure compliance with the owner’s interests, and the remnant losses.
The theory propounded in this paper tends to explain an array of financial questions related to the issuance of preferred stocks, promulgation of audit reports and soliciting the services of auditors by managers, imposition of restrictions on firms by lenders and endorsements of such restrictions by borrowing firms, the choice of capital sources preferred by varied industries, etc. This article happens to be completely theoretical in its scope, methodology, and totally relies on mathematical models to propound a generalized ‘agency theory’.
This article presents the finding that the separation of the actual management and ownership in any firm does always lead to the incurring of agency costs. The quantum of these agency costs will proportionally depend on the cost incurred by an owner if one does away with the manager concerned. The kind and magnitude of agency costs also depend on the types of monitoring costs accrued by an owner, the predilection of the concerned managers for monetary or non monetary gains, and the existence of such managers having the ability to maintain a total financial stake in any venture. The agency costs may be nil if an owner does not incur any monitoring costs. Agency costs may again be nil when a manager bears a complete financial stake in the venture one manages. Besides, in a debt scenario the nature and magnitude of agency costs will