Incentives, Investment Decisions & Firm Performance
In financial management, the agency dilemma or principal–agent problem occurs in an event when one entity or person (the agent) makes decisions on behalf of another entity or person (the principal). This dilemma exists because the manager (agent), sometimes, is motivated to make decisions in his own best interests instead of those in favor of his principal authority . Common examples of Principal-Agent relationship include corporate management of any organization (agent) and all of its shareholders (principal). This relationship is also found when politicians (agent) are obliged, as representatives, to work for the benefit and welfare of their voters ( Continue reading...
