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12 Cards in this Set
- Front
- Back
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Agency conflict |
selection of projects capital structure dividends Remuneration |
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Bond holders concern |
Higher interest rate Conversion right |
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Conflict Areas |
Information asymmetry Motivational problems Contractual problems Uncertainty |
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Information Asymmetry |
Credibility gap Window dressing Access to information Quality of information |
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Motivational problem |
CEO's package Salary Share options |
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Contractual Obligations |
Contractual Agreement from the bank may preclude investment into high risk ventures Restrictive covenants may be written into bonds to prevent managers investing in very risky projects |
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Shareholders - Managers |
Impose control Wealth maximisation |
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Bondholders - Managers |
lend covenants |
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Financial Market - Managers |
Transparent Mkt price = true value |
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Society -Managers |
law, regulations, good citizen societal cost reduced |
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Managers function |
choose projects finance them pay dividends |
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Financial Market function |
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