The underlying economic theory regarding many corporate governance issues is the principal-agency relationship between the senior managers and the shareholders of corporations. Explain this relationship.
Answer to relevant QuestionsWith respect to corporate governance, what are the mechanisms that can mitigate the likelihood that management will act in its own self-interest? What is meant by default correlation? Give two interpretations of the value of a bond from an option’s perspective. Answer the below questions. (a) What is meant by systematic risk factors? (b) What is the difference between term structure and non-term structure risk factors? The following excerpt is taken from an article titled “MERUS to Boost Corporates,” which appeared in the January 27, 1992, issue of BondWeek, p.6: MERUS Capital Management will increase the allocation to corporates in ...
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