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Game theory is important for the understanding of?
Oligopolies
Why were the colonies important in the theory of mercantilism?
The Colonies were important because they supply Great Britain raw resources and material.
What are the two theories of corporate social responsibility?
The two primary theories of corporate social responsibility (CSR) are the stakeholder theory and the shareholder theory. The stakeholder theory posits that companies have obligations to a wide range of stakeholders, including employees, customers, suppliers, and the community, emphasizing ethical considerations and social impact. In contrast, the shareholder theory, often associated with economist Milton Friedman, argues that a corporation's primary responsibility is to maximize shareholder value, suggesting that social initiatives should only be pursued if they align with profit-making objectives.
How the concept of agency theory can be used to explain the relationships that exist between the managers of a listed company and the providers of its equity finance?
Agency theory explores the relationship between principals (owners or shareholders) and agents (managers) in a company, highlighting potential conflicts of interest. In a listed company, managers may prioritize personal goals over shareholder value, leading to agency costs. Shareholders, as providers of equity finance, seek to align managerial actions with their interests through mechanisms such as performance-based compensation, oversight, and governance structures. These strategies aim to mitigate the risk of managers acting in their own self-interest rather than maximizing shareholder returns.
What are the benefits of raising taxes?
in theory to help pay for public services such as schools, roads, hospitals, fire fighting, law enforcement. in reality to make corrupt politicians richer
What issue does agency theory examine and is it more important in a public or private entity?
The agency theory examines the idea that when one group or individual hires another group or individual and gives them authority, numerous issues will arise between the two parties. This becomes more important in a public entity due to the conflicts between shareholders and the company management.
What are the problems of agency theory to the financial manager?
The problem of agency theory are pricniple and agent.
Strength and weaknesses of agenda setting theory?
The strength of agenda-setting theory lies in its ability to illustrate how media influences public perception by highlighting certain issues over others, effectively shaping the public agenda. It emphasizes the power of media in prioritizing topics and influencing what the public considers important. However, a weakness of the theory is that it may oversimplify the relationship between media and public opinion, as it does not fully account for the role of individual agency, social context, and other influences on public perception. Additionally, the theory can struggle to explain how competing agendas coexist and interact within a diverse media landscape.
Why is agency theory important?
Agency theory is used to understand the relationships between agents and principals. The agent represents the principal in a particular business transaction and is expected to represent the best interests of the principal without regard for self-interest. ... This leads to the principal-agent problem.
What advantage agency theory?
Agency theory helps to align the interests of principals (shareholders) and agents (managers) by providing incentives for the agent to act in the best interest of the principal. Through mechanisms such as performance-based compensation and monitoring, agency theory aims to reduce agency conflicts and ensure that managers make decisions that maximize shareholder value. Additionally, agency theory provides a framework for understanding the relationships and responsibilities between principals and agents in a business setting.
State theory and public policy formulation?
Different theories of state are important in outlining the different processes of public policy and specially policy formulation. There are four major theories of state which shape policy formulation - i) Pluralistic theory of state ii) Marxist theory of state iii) Neo-liberal theory of state iv) Feminist theory of state
What is price theory?
In accordance with political costs theory, to avoid the shifting of business wealth towards the public and/or political sector, companies will voluntarily disclose information when this will lead to an improvement in the relationships with governments and the public sector by decreasing political costs (e.g. taxes) and obtaining certain advantages (subsidies, governmental actions in favour of the corporation, etc.).
What is political cost theory?
In accordance with political costs theory, to avoid the shifting of business wealth towards the public and/or political sector, companies will voluntarily disclose information when this will lead to an improvement in the relationships with governments and the public sector by decreasing political costs (e.g. taxes) and obtaining certain advantages (subsidies, governmental actions in favour of the corporation, etc.).
What is contained in the agency theory?
Agency theory is a theory explaining the relationship between principals, such as a shareholders, and agents, such as a company's executives. In this relationship the principal delegates or hires an agent to perform work. The theory attempts to deal with two specific problems: first, that the goals of the principal and agent are not in conflict (agency problem), and second, that the principal and agent reconcile different tolerances for risk.
How would you describe agency theory?
Agency theory pertains to the relationship between two parties; the first is the principal (or principals) and the second, the agent (or agents), who are engaged as employees or independent contractors.
What are the types of agency theory?
Two forms of agency theory have developed: positivist and principal-agent (Jensen, 1983). Positivist researchers have emphasized governance mechanisms primarily in large corporations.
Static trade-off theory relation to agency theory of capital structure?
Trade-off theory of capital structure basically entails offsetting the costs of debt against the benefits of debt. MM 1963 introduced the tax benefit of debt. Later work led to a optimal capital structure which is given by the trade off thoery. The first element usually considered as the cost of debt is usually the financial distress costs or bankruptcy costs of debt. It is important to note that this includes the direct and indirect bankruptcy costs. Trade-off theory can also include the agency costs from agency theory as a cost of debt to explain why companies dont have 100% debt as expected from MM 1963. 95% of empirical papers in this area of study looks at the conflict between managers and shareholders. The others look at conflicts between debtholders and shareholders. Both are equally important to explain how the agency theory is related to the trade-off theory. The introduction of a dynamic trade-off theory makes the predictions of the this theory a lot more accurate and reflective of that in practise.
