an agency relationship is a contract under which one or more people higher another person to perform some series and delegates decision making authority to that agent. agency problem or relationship may be defined as a potential conflict for own interest between stockholder versus managers and stockholders versus creditors.
business firms are owned financed and managed different group of people. they certainly have their own personal interest owners interest is to maximize the value of the firm so that the worth of their investment would be maximized creditors interest will be to maintain sufficient liquidity and to guard found similarly the board of members and managers employee interest may be reduced in working hour and maintain better standard of living for them. in this way increases the operating expenses and reduce the profitability which is against the interest of conflict among different interest group, it is call agency problem important agency relationship exists.
business firms are owned financed and managed different group of people. they certainly have their own personal interest owners interest is to maximize the value of the firm so that the worth of their investment would be maximized creditors interest will be to maintain sufficient liquidity and to guard found similarly the board of members and managers employee interest may be reduced in working hour and maintain better standard of living for them. in this way increases the operating expenses and reduce the profitability which is against the interest of conflict among different interest group, it is call agency problem important agency relationship exists.
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