Describe the separation of ownership from control in a listed corporation. Explain how that separation comes about and why it leads to the principal-agent problem.
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The separation of ownership from control in a listed corporation
- We can define the separation of ownership and control with reference to the owner-managed firm.
- Ownership means you own more than 50% of the business's equity. Control means you are the largest shareholder and can, based on your holdings and other factors, wield significant power over the business's affairs.
- In such a firm, the owner/manager possesses two principal attributes.
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