ACCOUNTING

Contemporary issues in Accounting



Contemporary issues in Accounting



Part A

Under the assumption of asymmetric information between manager and shareholders, the major theoretical result of Myers and Majluf is that a company may have to forego new investment projects, a priori cost (including net present value is positive), if it is for this constraint to an increase in capital (share issue). The company's financial structure is not neutral, and the impact of the investment project on it must be taken into account.Agents can indeed infer the private information held by the leader from funding decisions (self-financing, issuance of bonds, stocks, etc.). It takes and which changed the company's financial (the composition of its liabilities).

Myers and Majluf consider a corporate executive who is planning to launch an investment project. To do this, he is forced to resort to a capital increase, the own funds of the company being insufficient. New shareholders therefore access to the capital of the company, and there is a dilution of equity held by existing shareholders. The authors assume that only the leader knows the exact cost of the investment project and the true value of the company. In addition, all investors are aware of this asymmetry of information and know that the leader acts in the interest of existing shareholders.Information asymmetry does not affect the relationship between shareholders and manager in place, but, against a conflict of interest between existing shareholders and new investors (Haasm, 2005, pp. 66-68).

Every company is affected by external forces. They form the business environment of the company, who wants to position itself against competitors in the market and properly, this environment and the effective use and impact forces know exactly for its strategic planning.

Since these forces generally emanate from specific institutions or individuals that can identify the so-called stakeholders who pursue their own interests and act accordingly to the company. If their demands are not met, they will turn to other companies or to enforce their interests against the intentions of the company and the management will try.

It is important for businesses to manage strong relations with the stakeholders of the company that includes distributers, suppliers, creditors, government etc. Several Issues are created when it comes to their dealing (Haasm, 2005, pp. 66-68).

A stakeholder is any individual that has an concern or is influenced by a corporation. In other phrases, the stockholder isn't the only party having a stake in the corporation. Other stakeholders in a company encompass the workers, the employees' families, suppliers, clients, community, and others.

This suggests that there will be examples when administration is obligated to forfeit the earnings concerns of stockholders for those of other stakeholders. This idea functions founded on the implicit assumption that enterprises have responsibilities to all those influenced by the enterprise itself.

A stockholder or shareholder is the holder or proprietor of supply in a corporation.This holistic set about to enterprise harshly compares with the customary stockholder founded enterprise form which functions on the assumption that business' only blame is ...