One financial intermediary in our financial structure that helps to reduce the moral hazard from arising from the principal-agent problem is the.

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19-09-2022
Business

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One financial intermediary in our financial structure that helps to reduce the moral hazard from arising from the principal-agent problem is the.

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Asmasaadatkhan Asmasaadatkhan · Answer 1 · 2022-09-22T16:07:52-04:00

The principal-agent problem's moral hazard can be reduced by our financial system's financial intermediaries, one of which is the venture capital firm.

A financial intermediary puts itself at risk by acquiring financial assets and incurring debts for its own account in addition to serving as an agent for other institutional units (for example banks, insurance corporations, investments funds)

In exchange for equity, or ownership holdings, venture capital firms or funds invest these early-stage businesses. Venture capitalists take on the risk of investing in risky start-ups in the hopes that some of the firms they support will prosper.

Venture capital businesses have two methods to make money. There are two ways for entrepreneurial investors to make money. The first fee is for capital management for the business. VCs earn money in two different ways. There are two ways for entrepreneurial investors to make money. The first fee is for capital management for the business. The second is carried interest, or "carry," on the fund's investment return.

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