Question
A company sells assets to the founder's private firm at unfair prices. What conflict is present?
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Answer
Related-party transaction harming minority shareholders.
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Question
If shareholders reject a good project because most benefits would go to creditors, what conflict is this?
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Answer
Underinvestment harming firm value and debtholders.
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Question
Why does information asymmetry create agency problems in corporations?
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Answer
Agents know more than principals, hiding whether they act properly.
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Question
In corporate governance, what is the board-management principal-agent layer?
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Answer
The board is principal; management is agent.
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