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Answer the following questions regarding the goal of finance and agency. (a) The goal of finance is to maximise shareholders' wealth. A company is already
Answer the following questions regarding the goal of finance and agency. (a) The goal of finance is to maximise shareholders' wealth. A company is already meeting the government standards of safety and health at the work place. Suppose the company spends money to upgrade the cafeteria as well as provide some recreational facilities for its workers. Discuss whether this means that the management of the company is not maximising shareholder wealth. (b) The CEO of the company is an agent of the shareholders (the principal). Appraise the claim that since the CEO of a company owns 55% of the shares of a company there is no agency problem. (16 marks)
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