What kind of agency conflict between shareholders and creditors may exist? A conflict between shareholders and creditors is common for the company which uses debt capital to form an optimum capital structure. Agency relation exists when one party works as an agent of the principal. In an organization, management works as an agent of the owner or shareholders. When managers … [Read more...] about Conflict Between Shareholders and Creditors
Finance
Agency Conflict
What is Agency Conflict? Agency conflict is a common problem we face in an organization, this problem arises because of the difference in the interest of management, owner, and other related parties. An agency relationship arises whenever one or more individuals hire other individuals to perform some service and also delegate decision making authority to the agents. Here the … [Read more...] about Agency Conflict
What is a Bond
What is a Bond? Questions may arise in your mind that what is a bond. A bond is a financial instrument used by the government or corporations to collect money from the market. It provides a fixed benefit to the bondholders periodically and also at the time of maturity. Although the use of bonds as a financing instrument used in developed countries and is very popular around … [Read more...] about What is a Bond
Basic Types of Risk
What are the Basic Types of Risk? We know that future is uncertain, because of uncertainty; involvement of risk can be traced to our every part of life. When we talk about any investment we have to think about risk and return, higher the risk higher the rates of return and lower the risk lower the rates of return. Our life is directly related with economic activities where … [Read more...] about Basic Types of Risk
Perfect Capital Market
What is meant by a perfect capital market? If a capital market has the following characteristics then it would be considered as a perfect capital market. In perfect capital market case, assuming complete markets, perfect rationality of agents and under full information, the equilibrium occurs where the interest rates clear the market, with the supply of funds equal to the … [Read more...] about Perfect Capital Market