the use of debts financing to reduce the agency cost

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1、TheUseofDebtsFinancingtoReducetheAgencyCost-->TableofContents1.IntroductiontotheTopic:32.TheUseofDebtsFinancingtoReducetheAgencyCost:43.Conclusion:94.anagedbyprofessionalsgoalsandobjectivesthroughtheirstrategicplanningandimplementationeffortsarepaidsal

2、aries,perks,bonusesandotherincentivesfortheperformanceoftheiraryconcernsaretomeettherequirementsofdifferentstakeholdersoftheorganizationincludingshareholders,customer,andsociety,laborunionandalike.Hoesituationsinsteadoffulfillingtheirresponsibilitiesto

3、ayopttoedasagencyproblem.AccordingtoKuhlemeyer,(2004)theagent(management)iseveryresponsibilitytoensurethebestinterestsoftheirprincipal(shareholdersandotherstakeholdersoftheorganization),andiftheyfailedtodosotheyaretermedtoviolatingtheirprofessionalande

4、thicalresponsibilities.Duetorapidincreaseinsuchincidencethecorporatesectorhavenoplementedanumberoftoolsandtechniquesthatinturnlimitsthefreedomofmanagementandimposescertaincheckandbalanceontheirdecisionmaking,onesuchtechniqueistheuseofdebtsfinancinginth

5、ecapitalstructureoftheorganization.AccordingtoVanHorneixofafirm’spermanentlong-termfinancingrepresentedbydebt,preferredstockandmonstockequity”.Inthispapereffortsadethathoayemploydebtsinitscapitalstructuretoreducethecostassociatedandberoffinancialoption

6、satthedisposalofcorporations,andtheuseofparticularmethoddependsontheuniquecircumstancesconfrontedtheorganization,therisk-takingabilitiesoftheorganization,theabilitiesothemanagementtousefinancialleveragetomagnifyreturn,andtheeaseofaccesstothedifferentso

7、urcesoffinance.Thecapitalthatanorganizationemploysintheorganizationfortheacplishmentoftheorganizationlong-termgoalsandobjectivesmaytakets:equityfinancinganddebtsfinancing.BrighamHouston,(1999)havenotedthatthoseofsharesaretermedasshareholdersoftheorgani

8、zation,edas-->bondholdersorcreditorsoftheorganization.Theshareholdersoftheorganizationbesidesenjoyingalltherightsofoentthataremadeinreturnfortheircapitalintheorganizationistermedasdividend.Anorganizationmanagementmaynotpayalltheprofitea