Traditionally, Wall Street investment banks had been organized as partnerships, but by 2000 they had converted to being publicly traded corporations.As partnerships, the principle-agent problem is ________, but as publicly traded corporations, the principal-agent problem is often ________.

Question

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As partnerships, the principal-agent problem is reduced because partners have a direct stake in the firm's success, aligning their interests with those of the firm. As publicly traded corporations, the problem is more severe because managers may not have the same level of personal investment, leading to potential misalignment with shareholders' interests.

Traditionally, Wall Street Investment Banks Had Been Organized as Partnerships