Suppose you need additional capital to expand and you sell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur?

If I need additional capital, I will have to sell some stock to potential investors. Selling shares to the new employees raises revenue for the company and gives the new investors ownership rights. The company also increases the dividend obligation payable to the shareholders at the end of the trading period.

The type of agency conflict that may occur as a result of the sale of shares outside is a conflict between the managers of the company and the shareholders. Other conflicts that may arise from the sale of stock to outsiders are conflicts between managers and creditors and stockholders and creditors.

Answer by Academic.tip's expert
An answer to this question is provided by one of our experts who specializes in business & economics. Let us know how much you liked it and give it a rating.

Cite this page

Select a citation style:

References

Academic.Tips. (2023) 'Suppose you need additional capital to expand and you sell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur'. 11 March.

Reference

Academic.Tips. (2023, March 11). Suppose you need additional capital to expand and you sell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur? https://academic.tips/question/suppose-you-need-additional-capital-to-expand-and-you-sell-some-stock-to-outside-investors-if-you-maintain-enough-stock-to-control-the-company-what-type-of-agency-conflict-might-occur/

References

Academic.Tips. 2023. "Suppose you need additional capital to expand and you sell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur?" March 11, 2023. https://academic.tips/question/suppose-you-need-additional-capital-to-expand-and-you-sell-some-stock-to-outside-investors-if-you-maintain-enough-stock-to-control-the-company-what-type-of-agency-conflict-might-occur/.

1. Academic.Tips. "Suppose you need additional capital to expand and you sell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur?" March 11, 2023. https://academic.tips/question/suppose-you-need-additional-capital-to-expand-and-you-sell-some-stock-to-outside-investors-if-you-maintain-enough-stock-to-control-the-company-what-type-of-agency-conflict-might-occur/.


Bibliography


Academic.Tips. "Suppose you need additional capital to expand and you sell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur?" March 11, 2023. https://academic.tips/question/suppose-you-need-additional-capital-to-expand-and-you-sell-some-stock-to-outside-investors-if-you-maintain-enough-stock-to-control-the-company-what-type-of-agency-conflict-might-occur/.

Work Cited

"Suppose you need additional capital to expand and you sell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur?" Academic.Tips, 11 Mar. 2023, academic.tips/question/suppose-you-need-additional-capital-to-expand-and-you-sell-some-stock-to-outside-investors-if-you-maintain-enough-stock-to-control-the-company-what-type-of-agency-conflict-might-occur/.

Copy