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How has the agency theory been described?

Updated: 12/24/2022
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EncofBizandFinance

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agency theory is to help devise techniques for describing the conflict inherent in the principal-agent relationship and controlling the situations so that the agent, acting from self-interest, does as little harm as possible to the principal's interest

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The problem of agency theory are pricniple and agent.


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Agency theory is a theory explaining the relationship between principals, such as a shareholders, and agents, such as a company's executives. In this relationship the principal delegates or hires an agent to perform work. The theory attempts to deal with two specific problems: first, that the goals of the principal and agent are not in conflict (agency problem), and second, that the principal and agent reconcile different tolerances for risk.


How would you describe agency theory?

Agency theory pertains to the relationship between two parties; the first is the principal (or principals) and the second, the agent (or agents), who are engaged as employees or independent contractors.


What are the types of agency theory?

Two forms of agency theory have developed: positivist and principal-agent (Jensen, 1983). Positivist researchers have emphasized governance mechanisms primarily in large corporations.


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What issues does agency theory examine?

Agency TheoryAccording to Investopedia, "Agency theory is a very academic term. Essentially it involves the costs of resolving conflicts between the principals and agents and aligning interests of the two groups." It examine issues like, at what risk level will both debt holders ,manager ,and ultimately shareholder benefit maximally from investements undertaken by the companyAgency theory is also commonly used to examine the condition of slaves in the antebellum United States. Agency theory argues that slaves had some say in the way they were treated, such as by affecting their sale and their market value. Agency theory has also sometimes been used however, as something of an apology for slavery, and is therefore sometimes controversial.