Explain principal-agent relationship in a business context, and highlight the key factors in separation of ownership and control.
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Principal –agent is a core issue with businesses.
Principal hires agents to work in a certain way. The problem occurs when the Principal is not able to get in accordance with the agent’s incentives.
The agency costs are the key issue here. Agency costs are those costs that are incurred while the Principal deals with agents. Now these costs depend on various aspects, one of them is credit agency.
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