How Is It Possible to Have a Separation Between Ownership

question 45

Essay

How is it possible to have a separation between ownership and control of a major corporation? What specific type of market imperfection can cause this?

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Definitions:

Equity Method

An accounting technique used by firms to assess the profits earned from their investments in other companies, representing the income earned proportional to their ownership stake.

Intercompany Sale

Transactions of goods or services between subsidiaries within the same parent company.

Bond Discount

The amount by which the market price of a bond is lower than its principal amount due at maturity.

Equity Method

An accounting technique used to record an investor's proportional ownership in a company by recognizing income and increases in investment for the investor's share of the investee's profits.