Secondly, discuss the following statement in the context of the two prescribed readings below: “Lenders are wary of high-technology ventures because of their higher risk. Lenders can overcome this by developing close relationships with the business.” In order to understand the concepts of asymmetric information, first-time lending, repeat lending, and moral hazard, it is important to appreciate the underpinning theoretical framework – the principal-agent relationship. This is the examination of incentive problems among contracting parties, particularly within the business environment. Principal-agent theory concerns the problem of separation of ownership and control, motivation, incentive alignment and agreement. One party, the principal, engages another party, the agent, to perform some service on the principal’s behalf. However, it may be difficult and costly to ascertain whether or to what extent these obligations have been satisfied

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