1. Agency conflicts and costs The nature and effects of agency conflicts

1. Agency conflicts are a special example of a conflict of interest; specifically, they are created by the relationship between ? , and ? result from inconsistencies or disputes between the interests and motivations of the different parties. The magnitude of these conflicts may be made larger or smaller by the environment in which they occur and the availability of techniques or events to prevent, reduce, or rectify them.

2. For example, in businesses managed by professional managers, managers frequently have less financial and emotional commitment to the business than the firm’s owners (the firm’s common shareholders). The ? of ownership and management and the ? of decision making by the owners to the professional managers create an environment in which these conflicts can take root.

3. Left unaddressed, these conflicts can produce significant real and opportunity costs that the fir