Negative agency costs
Managerial opportunism is commonly considered as destructive for the parties involved in an agency relationship. Using a close formulation to Jensen and Meckling’s equity model, we consider an agency relationship between a manager and an investor. The latter is assumed to benefit from a market power through external funding opportunities. For high values of the prevailing rate of interest, we prove that the agency costs can be negative, either when the manager or the investor acts as the leader in the agency relation. These results suggest that external conditions may have a differentiated impact on the ex ante and ex post inefficiencies created by managerial opportunism.
|Date of creation:||2009|
|Contact details of provider:|| Postal: 61, Avenue de la Forêt Noire, F-67085 Strasbourg Cedex|
Phone: (33) 3 90 41 41 30
Fax: (33) 3 90 41 40 50
Web page: http://ifs.unistra.fr/large
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:lar:wpaper:2009-14. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christophe J. Godlewski)
If references are entirely missing, you can add them using this form.