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What are some of the forces that cause managers to act in the interest of shareholder?
There are many forces which will tend to create a convergence between the interests of stockholders and managers, and thus cause managers to be interested in maximizing a corporation's profits or value:
a. Competitive pressures could lead to stock price declines for nonperforming company, and again result in take overs, proxy contest, etc.
b. In many corporations, management remunerations are tied to the performance and managers frequently are awarded stock options which gain value as the price of shares rises. Thus, managers will have an interest in maximizing stockholder welfare.
c. Corporate shares are not only owned by widely dispersed stockholders but by large institutional holders such as: banks, insurance companies, mutual funds, pension funds, etc. These organizations employ analysts who continually study stock performance. Nonperforming companies would be sold from these institutions' portfolios, and lead to decreased prices of these stocks. This could lead to the dismissal of present management.
What else can I help you with?
What are the factors that prevent effective management?
Poor communication can prevent effective managers from meeting their objectives. The lack of empathy can also cause managers to be ineffective.
How does bankruptcy affect interest rates on loans and credit cards?
It cause interest rates to rise.
What does it mean for a company when the major stock holder sells out?
First we need to know which country you are in? It is possible for every shareholder to sell their share, the company will continue to exist if you want to know this. However in case of selling the share to another shareholder of the same company, it may cause some problems due to the country's regulation.
What interest rate will cause 2000 to gro wto 2247.20 in 2 years?
5.841
Why does the interest on my car loan fluctuate?
The interest on your car loan fluctuates because it is influenced by factors such as changes in the economy, the lender's policies, and your credit score. These factors can cause the interest rate to go up or down over time.
What is the cause of agency problem by managers?
The agency problem arises when there is a conflict of interest between managers (agents) and shareholders (principals). Managers may prioritize their own goals, such as job security, personal perks, or short-term profits, over the long-term interests of the shareholders. This misalignment can lead to decisions that do not maximize shareholder value, as managers might engage in risk-averse behavior or pursue projects that enhance their power rather than profitability. Effective governance mechanisms, such as performance-based incentives and oversight, are essential to mitigate these conflicts.
What are the forces that causes the managers to act in the interest of the shareholders?
There are many forces which will tend to create a convergence between the interests of stockholders and managers, and thus cause managers to be interested in maximizing a corporation's profits or value: a. Competitive pressures could lead to stock price declines for nonperforming company, and again result in take overs, proxy contest, etc. b. In many corporations, management remunerations are tied to the performance and managers frequently are awarded stock options which gain value as the price of shares rises. Thus, managers will have an interest in maximizing stockholder welfare. c. Corporate shares are not only owned by widely dispersed stockholders but by large institutional holders such as: banks, insurance companies, mutual funds, pension funds, etc. These organizations employ analysts who continually study stock performance. Nonperforming companies would be sold from these institutions' portfolios, and lead to decreased prices of these stocks. This could lead to the dismissal of present management.
What forces cause interest rates to change?
The following forces cause interest rate to change: 1.Inflationary pressure 2. Government borrowings 3. Liquidity in the system 4. Global scenario- Fed Reserve's interst rate structure 5. Demand and supply of money 6.Recession 7. Forex exchange market's swing
What forces cause strike slip fault?
The forces that cause strike slip faults are shearing forces. These forces refer to a pair of equally opposed forces.
What do unbalanced forces cause according to Newton's Formula?
Unbalanced forces cause acceleration.
What can other forces do that frictional forces cannot do?
cause motion &+ cause positive acceleration . #
Can natural forces cause glass to break?
some natural forces can cause glass to break
What is the name for forces that cause a change in the motion of an object?
The name for forces that cause a change in the motion of an object is "external forces." These forces can include friction, gravity, air resistance, and applied forces.
What is the cause of agency problem?
pursuit of personal interests by managers and undercompesation
What types of forces cause acceleration?
Forces such as gravity, friction, tension, and applied forces can cause acceleration in an object. When an unbalanced force acts on an object, it can cause the object to accelerate in the direction of the force.
How can targeting interest rates result in inflation sprialing out of control?
It could cause a kind of rubber-band effect on inflation. For instance, if the market is trying to keep interest rates high and the fed keeps dumping money into the market to try to keep interest rates low, one of these forces has to give. The market is going to be suddenly flushed with cash and risks an event that causes what would normally be a natural decrease in interest rates. This would cause a huge interest rate fluctuation and subsequent inflation.
What are the factors that prevent effective management?
Poor communication can prevent effective managers from meeting their objectives. The lack of empathy can also cause managers to be ineffective.
