Essay --

Many risks come along with big bonusesThe kick downstairs of the housing bubble in the US caused the collapse of financial institutions and the bailed forth of banks by governmental institutions resulting in the 2008 financial crisis. One of these banks was the Royal jargon of Scotland who ran out of money. Bankers were blamed for acting out of self- recreate and making raging decisions. These failures will be analysed in this essay by giving serve to the following question How did agency speculation contributed to the 2007 financial crisis?Introductory, agency theory discusses the relationship in which one party, the spark advance, delegates work to another, the agent (Eisenhardt, 1989). The core mentation behind agency theory is to through contracting align the interest of shareholders (principal) with that of the managers (agents) in order to maximize shareholders value. Thus, the decision-making is being separated from the party who bears the risk therefore, problems ca n arise. Firstly, the principal cannot verify whether the agent has behaved appropriately (the agent and principal have partly di...