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Shareholders and Management

There is near separation of ownership and management of the firm. Landlord employs professionals as managers who such have technical skills. Managers must take actions that are not in the greatest interest of shareholders. This is generally so whenever managers are not owners of the firm that is they don't have any shareholding. The task of the managers will be in conflict along with the interest of the landholders. The task of the managers is in conflict along with the interest of shareholders will be caused via:

Incentive Problem
Consumption of "Perquisites"
Different Risk-profile
Different Evaluation Horizons
Management Buy Out or MBO
Pursuing power and self esteem ambitions
Creative Accounting

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9519865

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