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Agency Problems Leading To Non Value-Maximizing Motives

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Explain how agency problems may lead to non value-maximizing motives for mergers. Discuss the various academic theories offered as the rationale for motives induced by the agency problem.

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Explain how agency problems may lead to non value-maximizing motives for mergers. Discuss the various academic theories offered as the rationale for motives induced by the agency problem.

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The main factor dealing with agency problems is that a major conflict of interest arises between those running the company and their actual duties to the company. When agency problems exist, it is because those in charge become more concerned with their own good -- the actions that will provide those in charge with the largest amounts of money and benefits. The focus remains on how they will benefit personally, and not what is best for the company, and more importantly, for the investors. ...

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