Agency Problem

Agency problem is the problem or conflict between the management of the company the the owner or principal of the company. The problem or conflict comes from the different interest of management and owner. This problem will affect the performance of the company and also the financial decision of the company such as when the company want to issue the new stock or the new bond.

Besides, the companies must run the business in the best interest of all stakeholders. One of the stakeholders is the shareholder. In order to achive that goal today many companies implement the corporate governance system. The corporate governance system is used to make sure that the management of the company can run the company in the best interest of all stakeholders. Because shareholders are part of stakeholder, therefore the corporate governance system can also reduce the agency problem.