What is meant by agency relationships and agency costs

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Reference no: EM13929532

1. It has been argued that shareholder wealth maximization is not a realistic norma- tive goal for the firm, given the social responsibility activities that the firm is "expected" to engage in (such as contributing to the arts, education, etc.). Explain why these social responsibility activities are not necessarily inconsistent with shareholder wealth maximization.

2. Explain why management may tend to pursue goals other than shareholder wealth maximization.

3. Explain what is meant by agency relationships and agency costs.

4. Give some examples of agency costs incurred by shareholders in the agency relationship between the shareholders (owners) and management of a firm.

Reference no: EM13929532

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