Other stakeholders such as the government, suppliers and customers all have their specific interests to look after and that might incur additional costs. Evidence from a Structural Estimation? They too share the same risk-averse strategy, since they cannot diversify their labour whereas the stockholders can diversify their stake in the equity. The information asymmetry that exists between shareholders and the Chief Executive Officer is generally considered to be a classic example of a principal—agent problem. Hidden categories: Webarchive template wayback links. They are therefore likely to give the CEO considerable leeway in taking risk averse projects, but if the manager is clearly underperforming, they will likely signal that to the stockholders. For example, piece rates are preferred for labor tasks where quality is readily observable, e. Stockholders on the other hand have an interest in taking on more risk.
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