agency
1 (Banking; USA). Name given to foreign banks' operations in the US market that do not have branch status.2 (USA) One of the federal agency issues. See agencies.3 ...
agency problem Reference library
The Handbook of International Financial Terms
According to principal-agent theory or analysis the two sides of a financing arrangement can be characterized as principals, those that
asymmetric information
1 An aspect of the agency problem in which managers have superior information to shareholders regarding the state of the shareholders' investment. See signalling hypothesis.2 The situation in which ...
corporate governance
The processes, both formal and informal, through which a corporation is administered and managed. Corporate governance involves the legal requirements imposed upon the corporation, the policies ...
employee stock option
An option on a firm's common stock granted to employees. Typically these are long term, up to five years. They form part of key staff and management incentives designed to ...
front running
The generally illegal practice in which brokers or intermediaries make their own deals on advance information provided by their investment analysis department, before acting for their clients on the ...
Greenbury Committee
A group of UK corporate executives established by the Confederation of British Industry to examine the issue of executive remuneration (cf. agency problem; Cadbury Committee on the Financial Aspects ...
incentive-compatible contract
A contract designed to ensure mutually beneficial behaviour by the parties. So, for example, the employment contracts of a company's managers might incorporate a bonus system to make sure that their ...
management buy-out
Acquisition of the equity capital of a firm by its managers. If the managers own or can borrow sufficient capital for a buy-out, this has the advantage of concentrating control in the hands of people ...
moral hazard
The observation that a contract which promises people payment on the occurrence of certain events will cause a change in behaviour to make these events more likely. For example, moral hazard suggests ...
performance shares
A way of remunerating management which involves payment of common stock or ordinary shares if certain performance targets are reached (cf. agency problem).
profit maximization
The act of making as much profit as possible for a business. It is standard in economic theory to assume that the actions of firms are guided by profit maximization. This applies equally to firms ...
