Resolving the Agency Problems of External Capital through Options

摘要: This paper investigates the role of stock options in resolving agency problems external capital as originally identified by Jensen and Meckling (1976). These are precipitated managerial incentives a) to consume excessive non-pecuniary benefits or perquisites beyond optimal level for sole ownership b) engage risk shifting productive decisions so transfer wealth from contributors. incentive can be resolved through a strategy that judiciously combines call put retained owner-manager financiers, respectively. The resolution this mechanism provides an economic rationale existence convertible debt. THE WORK BY JENSEN [7] has brought more realism theory firm. In their JM address context firm which is viewed nexus contracts among various factors production. contractual relationships involve conflicts arising pursuit self-interest. By limiting themselves entrepreneur who retains complete control firm, have demonstrated financing issuance common debt outsiders engenders costs. costs part manager's propensity nonpecuniary (perks) employing certain resources excess usage,1 his high investment projects bondholders stockholders.2