Residual Claimant
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Residual Claimant
The residual claimant refers to the economic agent who has the sole remaining claim on an organization's net cash flows, i.e. after the deduction of precedent agents' claims, and therefore also bears the residual risk. Residual risk is defined in this context as the risk associated with differences between the stochastic inflows of assets into the organization and precedent agents' claims on the organization's cash flows. Precedent agents' claims on an organization's cash flows can consist of e.g. employees' salaries, creditors' interest or the government's taxes. The concept of the residual claimant has been the subject of as well as used in over 8,000 scholarly articles, notably in law and economics, information economics and corporate finance. Its use can be traced back to the late 19th century and Francis Amasa Walker's 'residual claimant theory', which argues that in the distribution of wealth among profits, rent, interest and wages, the laborer is the residual claimant and wa ...
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Law And Economics
Law and economics, or economic analysis of law, is the application of microeconomic theory to the analysis of law, which emerged primarily from scholars of the Chicago school of economics. Economic concepts are used to explain the effects of laws, to assess which legal rules are economically efficient, and to predict which legal rules will be promulgated. There are two major branches of law and economics; one based on the application of the methods and theories of neoclassical economics to the positive and normative analysis of the law, and a second branch which focuses on an institutional analysis of law and legal institutions, with a broader focus on economic, political, and social outcomes, and overlapping with analyses of the institutions of politics and governance. History Origin The historical antecedents of law and economics can be traced back to the classical economists, who are credited with the foundations of modern economic thought. As early as the 18th century, ...
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Information Economics
Information economics or the economics of information is the branch of microeconomics that studies how information and information systems affect an economy and economic decisions. One application considers information embodied in certain types of commodities that are "expensive to produce but cheap to reproduce." Samuelson, Paul A., and William D. Nordhaus (2001). Economics, p.194. Examples include computer software (e.g., Microsoft Windows), pharmaceuticals, and technical books. Once information is recorded "on paper, in a computer, or on a compact disc, it can be reproduced and used by a second person essentially for free." Without the basic research, initial production of high-information commodities may be too unprofitable to market, a type of market failure. Government subsidization of basic research has been suggested as a way to mitigate the problem. The subject of "information economics" is treated under ''Journal of Economic Literature'' classification code JEL D8 ...
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Corporate Finance
Corporate finance is the area of finance that deals with the sources of funding, the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allocate financial resources. The primary goal of corporate finance is to maximize or increase shareholder value. Correspondingly, corporate finance comprises two main sub-disciplines. Capital budgeting is concerned with the setting of criteria about which value-adding projects should receive investment funding, and whether to finance that investment with equity or debt capital. Working capital management is the management of the company's monetary funds that deal with the short-term operating balance of current assets and current liabilities; the focus here is on managing cash, inventories, and short-term borrowing and lending (such as the terms on credit extended to customers). The terms corporate finance and corporate financier ar ...
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Francis Amasa Walker
Francis Amasa Walker (July 2, 1840 – January 5, 1897) was an American economist, statistician, journalist, educator, academic administrator, and an officer in the Union Army. Walker was born into a prominent Boston family, the son of the economist and politician Amasa Walker, and he graduated from Amherst College at the age of 20. He received a commission to join the 15th Massachusetts Infantry and quickly rose through the ranks as an assistant adjutant general. Walker fought in the Peninsula Campaign and was wounded at the Battle of Chancellorsville but subsequently participated in the Bristoe, Overland, and Richmond-Petersburg Campaigns before being captured by Confederate forces and held at the infamous Libby Prison. In July 1866, he was nominated by President Andrew Johnson and confirmed by the United States Senate for the award of the honorary grade of brevet brigadier general United States Volunteers, to rank from March 13, 1865, when he was 24 years old. Following ...
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Simon Patten
Simon Nelson Patten (May 1, 1852 – July 24, 1922) was an economist and the chair of the Wharton School of Business at the University of Pennsylvania. Patten was one of the first economists to posit a shift from an 'economics of scarcity' to an ' economics of abundance'; that is, he believed that soon there would be enough wealth to satisfy people's basic needs and that the economy would shift from an emphasis on production to consumption. Life and work Patten attended the University of Halle (1876–1879), where he came under the influence of Johannes Conrad, a member of the German Historical school, a group of economists who believed that scholars should use their expertise to help solve modern social problems. His German experience reinforced his belief in social reform and planned change, but within an American context—that is, change and reform through voluntary action with minimal governmental control. After several years of apprenticeship teaching in primary and se ...
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Jacob Hollander
Jacob Harry Hollander (1871–1940) was an American economist. Biography Hollander was born in Baltimore, Maryland. He graduated from Johns Hopkins University with a BA in 1891, and a PhD in 1894. He became associate professor of finance there. In 1900, he became assistant professor of political economy, becoming full professor in 1904. He was appointed secretary to the Bimetallic Commission of 1897. US President McKinley named him Treasurer of the island of Puerto Rico in 1900. He resigned in 1901 after introducing a tax system. He was special commissioner to investigate financial conditions in San Domingo and until 1908 was financial advisor of the Dominican Republic. He also was an official arbitrator in various labour disputes. Works His contributions to Ricardo scholarship are considerable. He edited the ''Letters of David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist. He was one of the most influential of the class ...
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James Bonar (civil Servant)
James Bonar (27 September 1852 – 18 January 1941) was a Scottish civil servant, political economist and historian of economic thought. He was born in Perth but brought up, from the age of four, in Glasgow where his father was a Church of Scotland Minister. This clerical background extends to two uncles, both ministers who 'came out' in the disruption of 1843, both later serving terms as Moderator of the Free Church General Assembly. From Glasgow Academy Bonar graduated MA in Mental Philosophy from Glasgow University in 1874. He followed the same lengthy undergraduate career that Adam Smith pursued more than a century before gaining a Snell Exhibition to Balliol College, Oxford from which he graduated with a first in 1877. A major early influence was the moral philosopher, Edward Caird: first as Professor at Glasgow and then as Master of Balliol. Together with his family background that influence helps explain Bonar's decision to spend the next three years teaching economics ...
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Moral Hazard
In economics, a moral hazard is a situation where an economic actor has an incentive to increase its exposure to risk because it does not bear the full costs of that risk. For example, when a corporation is insured, it may take on higher risk knowing that its insurance will pay the associated costs. A moral hazard may occur where the actions of the risk-taking party change to the detriment of the cost-bearing party after a financial transaction has taken place. Moral hazard can occur under a type of information asymmetry where the risk-taking party to a transaction knows more about its intentions than the party paying the consequences of the risk and has a tendency or incentive to take on too much risk from the perspective of the party with less information. One example is a principal–agent problem, where one party, called an agent, acts on behalf of another party, called the principal. If the agent has more information about his or her actions or intentions than the princi ...
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Information Asymmetry
In contract theory and economics, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. Information asymmetry creates an imbalance of power in transactions, which can sometimes cause the transactions to be inefficient, causing market failure in the worst case. Examples of this problem are adverse selection, moral hazard, and monopolies of knowledge. A common way to visualise information asymmetry is with a scale with one side being the seller and the other the buyer. When the seller has more or better information the transaction will more likely occur in the seller's favour ("the balance of power has shifted to the seller"). An example of this could be when a used car is sold, the seller is likely to have a much better understanding of the car's condition and hence its market value than the buyer, who can only estimate the market value based on the information provided by the seller and their own a ...
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Principal–agent Problem
The principal–agent problem refers to the conflict in interests and priorities that arises when one person or entity (the "agent") takes actions on behalf of another person or entity (the " principal"). The problem worsens when there is a greater discrepancy of interests and information between the principal and agent, as well as when the principal lacks the means to punish the agent. The deviation from the principal's interest by the agent is called "agency costs".''Pay Without Performance'', Lucian Bebchuk and Jesse Fried, Harvard University Press 2004preface and introduction Common examples of this relationship include corporate management (agent) and shareholders (principal), elected officials (agent) and citizens (principal), or brokers (agent) and markets (buyers and sellers, principals). In all these cases, the principal has to be concerned with whether the agent is acting in the best interest of the principal. The concepts of moral hazard and conflict of interest r ...
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Herbert Gintis
Herbert Gintis (February 11, 1940 – January 5, 2023) was an American economist, behavioral scientist, and educator known for his theoretical contributions to sociobiology, especially altruism, cooperation, epistemic game theory, gene-culture coevolution, efficiency wages, strong reciprocity, and human capital theory. Throughout his career, he worked extensively with economist Samuel Bowles. Their landmark book, ''Schooling in Capitalist America'', had multiple editions in five languages since it was first published in 1976. Their book, ''A Cooperative Species: Human Reciprocity and its Evolution'' was published by Princeton University Press in 2011. Life and career Gintis was born in Philadelphia, Pennsylvania, where his father had a retail furniture business. He grew up there and later in Bala Cynwyd (just outside Philadelphia). Gintis completed his undergraduate degree at the University of Pennsylvania in three years, one of which was spent at the University of Paris, and ...
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