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1. Explain the nature of the agency problem between shareholders and managers. What is it that...

1. Explain the nature of the agency problem between shareholders and managers. What is it that allows managers to engage in these behaviors? Please be specific. Discuss two things in the corporate governance system that can make the problem worse, and two things that can make it better.

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Answer #1

Agency problem

Agency problem is the problem that managers acts in their own interest with the cost of shareholders interest...

Conflict of interest is the main thing that causes the managers to such thing....

Two things of corporate governance make it worse

1.free hand given to managers in decisions

2.proper controls are not in places

Two things make situation better

1.proper overssight to actions done by managers

2.understanding the problem of managers and resolving them from time to time...

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