Agency Problem Assignment Help: Agency problems exist when there is difference between the objectives of two parties. These problems result in
inefficiency in management of an organization. As a result of this, to handle or address the generated problems, management decides to opt for decisions like mergers whether they are value adding or non-value adding to the organizational business. Agency problems may lead to non-value maximizing motives in following ways:
Creating problems: Agency problems by disturbing the harmony between managers and shareholders of the organization lead to non-value maximizing motives for mergers. As a result of this, managers adopt merger strategies for their own benefit. Due to difference in objectives of managers and shareholders, the benefits of managers become the expenses of shareholders.
Personal Interest: By creating personal interest, agency problems may develop motives for mergers among the management. As a result of this, to fulfill the personal interests, managers go for mergers.
Managerial Inefficiency: By developing inefficiency among managers, agency problems create situation that is needed to be resolved by outsiders through mergers that are not value-added, as these mergers are in the benefits of outsiders rather than management. In other words, the mergers are performed at discount rates that only result beneficial for the acquiring firm rather than acquired firm. Here, in this case, inefficiency of management becomes the motive behind non-value adding mergers.
Conflicting situation: Agency problems may result into non value adding mergers by creating conflicts among the managers and shareholders regarding the distribution of cash flows. Due to these conflicting situations, managers invest into unprofitable mergers and ignore the considerations of their shareholders. So, it can be argued that distribution of cash flows become the motive for non-value adding mergers.
Managerialism: As a result of agency problems, situation of managerialism takes place in the organization, where managers want to increase the size and scope of organization rather than increasing the wealth of shareholders. Due to this, mergers that are not value-added take place in the organization. So, it can be argued that professional need and interest of managers are the motives that are generated by agency problems for mergers. Get Agency Problem Assignment Help from assignmenthelpexperts.com Please e-mail us your assignment help at info@www.assignmenthelpexperts.com. We ensure you that you will get complete and original assignment help services. You can send us any subject assignment help…Get A++ assignment writing help now…