In the first module, we discussed the goals of financial management, agency problems and the role of...

Question

In the first module, we discussed the goals of financial management, agency problems and the role of corporate governance in reducing agency problems.
We learned that the main goal of financial management is to maximize stockholder wealth. Do you agree with this statement? What are the pros and cons of focusing on stockholders instead of stakeholders? Which one do you think is more sustainable in the long-run?
In addition, please further discuss different mechanisms (managerial compensation, board of directors and market control) that corporations can use to curb agency problems. Which mechanism do you think is most effective in curbing agency problems?
Alternatively, post a relevant recent news article related to the agency problem or corporate governance mechanisms to curb agency problems. Remember to provide a link to the article and state briefly why you think that this article is important.

Preeta · Accepted Answer

The main goal of the financial management is maximizing the value of the company to its owners. So, in a way, the main goal of the financial management is to maximize wealth of the shareholders.  
The pros of maximizing shareholder’s wealth is that the return of the owners will highly increase and based on that the market price of the shares will also increase. But the cons of it are that the business should think about all of its stakeholders and not just shareholders,

In the first module, we discussed the goals of financial management, agency problems and the role of corporate governance in reducing agency problems. We learned that the main goal of financial...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment