Answer Happy

A small company, Stevens Textile Co. is expanding its operations
and needs additional financing to support its expansion projects.
The company is planning to change its business registration from a
limited liability company to a corporation. As a corporation it
will be listed on the stock exchange market and sell shares to the
public to raise capital from investors. The business will be
managed by professional executives who are not owners of the
corporation.
1. Explain agency
relationship and agency costs to the
owners of Stevens Textile Co.
2. Suppose Stevens Textile company is very successful and the
founders’ cash out most of their stock and turn the company over to
an elected board of directors. Neither the founders nor any other
stockholders own a controlling interest (this is the situation in
most public companies). List six potential managerial behaviors
that can harm a firm’s value.
3. What is corporate governance? List five
corporate governance provisions that are internal to a firm and
under its control.
4. Stevens Textile Co. might want to reduce the conflict of
interest that may arise between corporate executives and
shareholders by electing board of directors to oversee the
activities of the corporate executives.
Identify five characteristics of the board of
directors that usually lead to effective corporate governance.
use the upper example to answer the four questions.
thanks