Essay Finance Statement

1808 Words Jan 3rd, 2014 8 Pages
The relationship between management and shareholders is sometimes referred to as an Agency Relationship, in which managers act as agents for the shareholders, using delegation powers to run the affairs of the company in the best interest of the shareholders. Since the agent and the manager may have different value of the company to perform agency relationship share prices.When a manager hires an agent to carry out specific tasks, the hiring is be called principal agent relationship, or simply an agency relationship. When a conflict of interest between the needs of the principal and those of the agent arises, the conflict is called an agency problem.In financial markets, agency problems occur between the stockholders and corporate managers …show more content…
Managers in very big companies, or in very profitable companies, increase the current share price of £25 per share to a valve higher than the current bidders price of £35 will normally expect to earn higher salaries than managers in smaller or less successful companies.Agency theory suggests that audited accounts of a limited company are an important source of post decision information minimizing investors’ agency costs, in contrast to the alternative approaches which see financial reports as primarily a source of pre decision

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