Agency problem: Difference between revisions
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The agency problem refers to the problems which arise when management is separated from ownership. | The agency problem refers to the problems which arise when management of an organisation is separated from its ownership. | ||
Revision as of 17:05, 18 April 2015
The agency problem refers to the problems which arise when management of an organisation is separated from its ownership.
The main potential problem is that the managers (agents) may not act in the best interests of the owners (for example shareholders).
When managers do not act in the owners' best interests, agency costs will arise.
