Management–Stockholder Relations: Is Optimal Behavior All That Is Necessary?

John B. Guerard, Anureet Saxena () and Mustafa N. Gültekin
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John B. Guerard: McKinley Capital Management, LLC
Anureet Saxena: McKinley Capital Mgmt, LLC
Mustafa N. Gültekin: University of North Carolina Chapel Hill

Chapter Chapter 22 in Quantitative Corporate Finance, 2022, pp 613-649 from Springer

Abstract: Abstract So long as a company is closely held, the control group and the stockholders are identical, and seldom is there a conflict of interest between them. However, once a company goes public, it acquires a group of shareholders who depend on the management for the safety and profitability of their investment. In short, an agency principal relation is established where the management is the agent and the shareholder is the principal. This relation implies a commitment by management that the outside shareholders will be treated fairly in such matters as cash payouts, expansion policies, accounting probity, and the level of executive compensation, and that in general, the company affairs will be directed vigorously and conscientiously.

Date: 2022
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DOI: 10.1007/978-3-030-87269-4_22

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