Tag: Principal agency theory
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Do you support the idea of the government stepping in to help companies in trouble? Could this promote the moral hazard problem?
Moral Hazard Discussion An agency theory is a contractual relation between an agent and a principle. An agency relation has a couple of problems. They are generally categorized into one of two forms: moral hazard or adverse selection. Moral hazard arises when a principal is unable to control the actions of an agent, and these…