Agency Theory

Agency theory is a useful framework for designing governance and controls in organisations. The concept offers a solid introduction to the topic by evaluating its strengths and weaknesses and uses case study evidence to demonstrate how the theory has been applied in different industries and contexts. Measures and success factors are also provided.

Technique Overview

Agency Theory

Agency Theory Definition

Agency theory is a management and economic theory that attempts to explain relationships and self-interest in business organisations. It describes the relationship between principles/agents and delegation of control. It explains how best to organise relationships in which one party (principal) determines the work and which another party (agent) performs or makes decisions on behalf of the principal (Jensen and Meckling, 1976; Schroeder et al., 2011).

Agency Theory Description *

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Business Evidence

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Examples of Agency Theory *

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Business Application

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Professional Tools

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Further Reading

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Agency Theory References (4 of up to 20) *

  • Antoniadis, I., Lazarides, T., Sarrianidis, N., and Goupa H. (2008) The impact of agency problem in firm value and the Greek stock exchange market financial crisis. International Conference on Applied Economics – ICOAE 2008, pp. 27-33.
  • Arnold, B., and de Lange, P. (2004) Enron: an examination of agency problems. Critical Perspectives on Accounting, Vol.15, pp. 751-765.
  • Band, D. (1992) Corporate governance: why agency theory is not enough. European Management Journal, Vol.10(4), pp. 453-460.
  • Banks, J. S. (1995) The design of institutions: an agency theory perspective. In: Institutional design, Weime, D. L. (Ed.). Kluwer Academic Publishers: Boston/Dordrecht/London.

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