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香港Financial Management课程论文范文--英国论文代写范文精选

2015-11-13 | 来源:51Due教员组 | 类别:更多范文

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香港Financial Management课程论文范文
1.0 Introduction
The agency theory is one of the most important theories in manage the finance. It assumes that the company can be considered as a nexus of contracts between the shareholders of the resources. With the quick development of the economy, the agency becomes more and more popular among all the industries, which is a relation arising whenever one or more than one personals employ other personals to offer some service and delegate the authority to the agents to make some decisions. The relationships can be various and complex, which includes the relation between the stockholders and managers, and the debt-holders and stockholders (Bamberg, 1987). The conflicts in the agency relationships are obvious, which has been viewed as the key content of the agency theory (Edward, 1992). Therefore, the agency theory has developed into one main model in the financial management. The paper will mainly analyze and evaluate the diverse methods employed by the shareholders of a firm to encourage the managers to maximize the interests of the shareholders.
2.0 Agency can effect financial management
2.1 The importance of the agency theory in financial management
The agency theory plays an essential role in the financial management of a company. In the long term of the development of a firm, the company has accustomed to using the agency theory to maximize the wealth of the shareholders to realize the increase of the profit as much as possible (Li, 2011). This measure can help the company to survive from the increasingly fierce competitions in the world economy. The agency theory can raise a basic issue in firms, such as a self-interested behavior. The managers of a company may have his or her own aims which can compete with the goals of the owner in maximizing the shareholders’ wealth (Bamberg, 1987). A potential conflict of the goals exists between the 2 parties, for the shareholders authorize the managers to manage the assets of the corporation (Edward, 1992).
The information asymmetry can leads to some issues. When the information between the two groups is asymmetric (the agent always knowing more information), the principal is not able to make sure that the agent is often acting in the best interests of the principal, especially while the activities which are effective to the principal are expensive to the agent, and in which places the elements done by the agents are costly for the principal to expect (Michael, 1983). The hazard in moral and the conflict in interests may occur. It is sensible to recognize the information asymmetry to take some useful measures to balance the agents and the principals to promote the comparatively harmonious relationships. Only in this way can the agency theory be used efficiently to contribute to the fast development of the corporations and the world economy (Leland, 1998).
2.2 Agency problem between shareholder and manager
The agency problem between the shareholders and managers of a corporation is quite prevalent. The two positions to cope with the shareholder-manager agency problems can be too extreme. From one polar, the managers of the corporation are compensated totally based on the changes of the stock price (Stokey, 1983). Thus, the costs of the agency will be low, for the managers have strong aims to maximize the wealth of the shareholders. This would be rather hard to employ gifted managers under the contractual terms, in that the profits of the firms would be influenced by the economic incidents that are out of the control of the managers (Michael, 1983). From the other polar, the stockholders could observe all the managerial activities, but this behavior could be quite expensive and inefficient. In this way, the agency problem between shareholder and manager can affect the sound and quick development of the firms to a great degree, which should be solved with some effective measures. Thus, there is an optimal way to deal with the problems. The executive compensation can be tied to the performance, and at the same time, some monitoring actions can also be undertaken (William, 1976). Some other measures can also be effective to cope with the agency issue, such as making incentive projects on the basis of the performance, intervening directly by the shareholders, the firing threat and the takeover danger.
2.3 Strength and Weakness of different ways of agency problem
Most corporations doing business publicly now use the performance shares. When the firm performance is above the aim of the performance, the managers of the corporation can get more shares. Vice versa, the managers will enjoy fewer shares. The compensation projects on the basis of the incentive are employed to meet the needs of the two objectives (Joseph, 1987). On the one hand, they provide the executives incentives to take some measures to enhance the wealth of the shareholder. On the other hand, the plans can assist corporations to attract and keep confident managers to take risks of their own financial future with their own capacities, which can lead to much better performance. These can be seen as the strength of different ways to cope with the agency problems (Nicholas, 1984). Every coin has two sides. The weakness is that the fact will always confirm to the expectations. The performance shares and the compensation plans can not become perfect, which may also harm the interests of other individuals in the company. The methods can not satisfy all the members in the corporation.
3.0 Ways to maximize wealth of shareholders
3.1 The analysis of Enron Corporation
The methods to maximize the wealth of the shareholders are diverse. To maximize the shareholder wealth has become the most essential aim of a firm.
There is a bottom line in which the profits is demanded to raise the dividends paid out with every common stock which composes the wealth of the shareholder. Therefore, an effective company manager can care more about the main methods of making profits within a firm (Shankman, 1999). For instance, the Enron Corporation did not follow the bottom line, and it went through the process of downfall. The financial statements of the Enron Corporation were too confusing to be understood by the shareholders and the analysis (Pink, 2009). Moreover, the complicated business model and the practices that were not ethical requested that the firm employ accounting limitations to present fake earnings and falsify the balance sheet to display the pleasant performance. The Enron Corporation disobeyed the bottom line, which led to the bankruptcy of it. In order to maximize the wealth of the shareholders, the Enron Corporation should maintain the powerful brand name and manufacture a satisfying customer product (Bebchuk, 2004). The status of the brand and the product play an important role in promoting the profits of a firm.
It is a gorgeous way to motivate the managers to maximize the wealth of the shareholders by offering stock choices to the managers. This kind of additional motivation and a standard commission or salary can promote the employees to work more efficiently and effectively in the long run. However, the salary of Enron Corporation was not so satisfying, so it did not continue to be prosperous. In the end, it went bankruptcy, which is pity for the economy.
Enron Corporation has become one of the most popular cases in analyzing the proper ways to maximize wealth of shareholders (William, 1976). In order to develop sound and fast, the Enron Corporation should seek for the right and appropriate measures to make profits to enhance the status of the company in the long term.
3.2 The ways to reduce the agency problem
Firstly, the employment of tipping for the owners and the managers to arrange the interests of the service workers can reduce the conflicts in the employment contract to a great degree, which can also benefit the business of the corporation (Michael, 1983). Secondly, non-financial compensation, such as the changes in the supervisory mechanisms and the incentive structures can also be effective (Pendergast, 1999). Thirdly, the evaluation of the performance of the managers and the agent can also promote the decreasing of the agency problem, which can benefit the company’s interests in the long run (William, 1976). The ways can be various due to the distinct practical conditions.
4.0 Conclusion
In conclusion, the paper in the above has illustrated the main ideas of the agency theory. The agency theory becomes more and more important in managing the finance of a company, which calls for the detailed analysis with some practical examples. The agency can affect the financial management in various aspects of a firm. In the long run, the agency theory can assist the company to maximize the wealth of the shareholders to a great extent. However, the agency problem between the shareholder and the manager is also quite serious. Different ways in coping with the agency problems have some strengths and weakness as well. The case of the Enron Corporation has also been analyzed in the above, so as to make the explanation more specific and authentic. The means to reduce the agency problems have also been stated in the third part of the paper. Hopefully, the paper can contribute to the clear understanding of the agency theory and assist in the quick progress of the corporations.
5.0 Reference
Bamberg, 1987, Agency Theory, Information, and Incentives, Springer-Verlag Press, Berlin.
Edward Freeman, 1992, Ethics and Agency Theory: An Introduction, Oxford University Press, New York.
Leland E., 1998, Agency Costs, Risk Management, and Capital Structure,Journal of Finance, vol. 6, no. 6, pp. 760–807.
Lucian Bebchuk, 2004, Pay Without Performance, Harvard University Press, London.
Li, Hongxia, 2011, Capital Structure on Agency Costs in Chinese Listed Firms, International Journal of Governance, vol. 1, no. 2, pp. 26–39.
Michael Jensen, 1983, Agency Problems and Residual Claims,Journal of Law and Economics, vol. 26, no. 3, pp. 327-349.
Nicholas Majluf, 1984, Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have, Journal of Financial Economics, vol. 3,no.6, pp. 187-221.
Pendergast, Canice, 1999, The Provision of Incentives in Firms, Journal of Economic Literature, vol. 37, no. 10, pp. 7–63.
Pink, Daniel H., 2009, Drive: The Surprising Truth about What Motivates Us, Riverhead Books, New York.
Stokey, N. L., 1983, A Comparison of Tournaments and Contracts, Journal of Political Economy, vol. 91, no. 8, pp. 349–364.
Shankman, Neil A., 1999, Reframing the Debate between Agency and Stakeholder Theories of the Firm, Journal of Business Ethics, vol. 6, no. 7, pp. 364–410.
Springer, T., 2005, Conflicts between Principals and Agents: Evidence from Residential Brokerage, Journal of Financial Economics, vol. 76, no. 4, pp. 627-665.
Stiglitz, Joseph E., 1987, Principal and agent, The New Palgrave: A Dictionary of Economics, vol. 3 no. 5, pp. 966–971.
William H. Meckling, 1976, Theory of the Firm, Managerial Behavior, Agency Costs, and Ownership Structure, Journal of Financial Economics, vol. 3,no. 4, pp. 305-360.


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