Question

What are principal-agent agency problems and principal-principal agency problems?

What are principal-agent agency problems and principal-principal agency problems?

Homework Answers

Answer #1

Principal-agent agency problem occurs when the agent feels that the incentive that the principle gives agent is far lower than the incentive that the principle receives himself. The agent feels he is being exploited by the principal by not giving him a fair share of incentive.

Principal-Principal agency problems generally occur in case of joint stock form of organization. In this case minority stockholders feel insecure and being exploited by those share holders having controlling interest.

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