Articles week 2 Flashcards
(3 cards)
1
Q
How do Jensen & Meckling (1976) define a firm?
A
As a nexus of contracts among individuals, not as a single entity.
2
Q
What happens as managerial ownership decreases?
A
The manager’s incentive to maximize firm value declines, increasing agency costs.
3
Q
What is the relationship between ownership structure and firm value?
A
The higher the managerial ownership, the more closely their incentives align with shareholders, potentially increasing firm value.
