Agency Dilemma

(noun)

Takes into account the difficulties in motivating one party (the "agent"), to act on behalf of another (the "principal").

Examples of Agency Dilemma in the following topics:

  • Defining Agency Conflicts

    • Agency conflicts can occur when the incentives of the agent do not align with those of the principal.
    • The principal–agent problem or agency dilemma, developed in economic theory, concerns the difficulties in motivating one party (the "agent"), to act on behalf of another (the "principal").
    • The deviation from the principal's interest by the agent is called "agency costs. " Agency costs mainly arise due to contracting costs and the divergence of control, separation of ownership and control, and the different objectives (rather than shareholder maximization) of the managers.

  • International Credit Rating Agencies

  • Becoming an International Bank

    • Agency office cannot accept deposits from U.S. residents, but it can lend to them.
    • Agency office receives its funding from foreign depositors and investors.
    • Agency office is similar to a nonbank bank, and it circumvents the numerous U.S. banking regulations because the legal definition of a bank is an institution that accepts deposits and grants loans.

  • Agency

  • Conflicts Between Managers and Shareholders

    • Agency costs mainly occur when ownership is separated, or when managers have objectives other than shareholder value maximization.

  • Bond Rating System

    • .; Japan Credit Rating Agency, Ltd.; LACE Financial Corp.; Moody's Investors Service, Inc.; Rating and Investment Information, Inc.; and Standard & Poor's Ratings Services.
    • Under the Credit Rating Agency Reform Act, an NRSRO may be registered with respect to up to five classes of credit ratings: (1) financial institutions, brokers, or dealers; (2) insurance companies; (3) corporate issuers; (4) issuers of asset-backed securities; and (5) issuers of government securities, municipal securities, or securities issued by a foreign government.

  • Constraint on Managers

    • This is known as an agency dilemma.

  • Benefits and Risks of Operating Leverage

    • In other words, the uncertainty of generating a necessary amount of sales is a dilemma all businesses face.

  • Managers, Shareholders, and Bondholders

    • The deviation from the principal's interest by the agent is called 'agency costs. ' Agency costs mainly arise due to contracting costs and the divergence of control, separation of ownership and control and the different objectives of the managers and other stakeholders.

  • Ratings