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Module 6 Discussion Topic
Briefly describe the agency problem that exists between owners and lenders. How do lenders cause firms to incur agency costs to resolve this problem?
Introduction to DQ6
This DQ goes back from some of the initial parts of this course to the Contents section of M1.
To get us going, lenders are not involved in the day-to-day operations and business decisions made by the owners in running their businesses. Also, owners may not be making decisions, both short- and long-term, which are in the best interest of their lender(s) or that might affect a lender’s decision about lending money to a business (or its owners). Hence, the agency problem exists in this type of relationship.
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