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   Agency Costs
   















 

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Agency Costs

In a corporate context, a tendency for managers to make decisions that may be in their own interest but not in the interest of shareholders or consistent with the risks bondholders accepted when they purchased their stake in the company. A corporate aircraft or resort property might be useful to management, but not in shareholders' interest. A risky 'bet-the-company' business strategy might be appropriate for managers and shareholders if it is the only chance to save their jobs and investments, but its failure will be borne by bondholders. See also Moral Hazard.

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