What are the agency problem in financial institutions?
The large chunks of funds in financial institutions come from
the public. This means the promoters share is very less compared to
that of public. Hence, there is conflict of interest between two
parties giving rise to agency problem.
Related Q&A：
What does the agency problem refer to？Well, let me tell ya. The agency problem refers to a situation where there's a conflict of interest between the principals, like the shareholders of a company, and the agents, like the managers. You see, the agents might make decisions that benefit themselves rather than the principals. For example, they might take risky actions for short-term gains at the expense of the long-term health of the company. Oh, and this can lead to all sorts of problems like lower profits, bad decisions, and a loss of trust. So, it's a big deal in the business world, ya know?
