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Efficient Market Hypothesis An
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The quote shows a strong relation to the efficient market hypothesis (EMH), as it implies that the costs of capital are dependent from the amount of information given by the company.
According to my opinion, agency theory is a good explanation for costs of capital. Agency theory defines contracts a ....
Middle of essay
....costs, because they are the costs of bonding the agent’s interest to the principal’s. Quarterly financial reports are bonding costs, namely the time and effort invested to generate the financial report. Agents will normally weigh bonding costs with monitoring costs and chose the cheaper alternative.
(3) Despite bonding and monitoring costs, it is still likely that agents’ interests will not correspond exactly with the principals’. If the manager is not motivated and does .... |
| Number of words: 2757 |
Approximate pages: 11 |
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