PAPER Topics

Start of Term Paper
The quote shows a strong relation to the efficient market hypothesis (EMH), as it implies that the costs of capital are dependent from the amount of information given by the company. According to my opinion, agency theory is a good explanation ....

Middle of Term Paper
... costs, and (3) residual loss. (1) Monitoring costs are the costs of monitoring agent’s behaviour. They are expenses of the principal to measure, observe, and control the agent’s behaviour. Good examples for monitoring costs are auditing costs. To protect themselves of huge monitoring costs principals are bearing the costs to agents. An example can be given in lending: A high-risk company has high monitoring costs, which leads to a high interest rate. Another example would be the reputation of the manager: Has he got a bad reputation, than his salary would be lower than usual. Agents try to reduce monitoring costs by installing ...