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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 fee
An annual fee paid to an agent for the work and responsibility involved in managing a loan after it has been signed.
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
agency relationship
The explicit and implicit contractual relationship between the principal, as owner, and the agent, as manager. See agency problem.
agent
A person appointed by another person, known as the principal, to act on his or her behalf. The directors of a company are agents of the shareholders (the principal). See agency relationship.
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 ...
Cadbury Report
A report on the financial aspects of corporate governance in the UK issued in 1992 by a committee under Sir Adrian Cadbury. The so-called Cadbury Code of best practice recommended that non-executive ...
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 ...
negligence
N.1 Carelessness amounting to the culpable breach of a duty: failure to do or recognize something that a reasonable person (i.e. an average responsible citizen) would do or recognize, or doing ...
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 ...
shareholder value
A precept of corporate governance and a criterion of financial management, that decisions should be made with a view to maximizing shareholder value. That is, capital budgeting and other corporate ...
signalling hypothesis
The idea that many actions taken by economic agents are motivated chiefly by the wish to send a positive ‘signal’ to other agents, rather than by their ostensible purpose. This can be a means of ...
