Better Essays words 4. The theory dates back to the early s and s when economist began exploring risk sharing among individuals Eisenhardt p Agency theory suggests that there is a conflict between the two parties, the principal and the agent, due to a misalignment of goals as well as different aversions to levels of risk Agency Costs are put in place to force Management to act in the interest of owners, who are not part of the day-to-day activities.
There is no room for error if the Agency Theory and Cost principles are enforced on an entity. Owners put a lot of faith in the Board of Directors to Manage the Company on their behalf, and rely on the Board of Directors to make important decisions that benefit the interest of the company and not that of their own In regards to the problems, there is also an information of asymmetry, which would described as the agents would have more information than the principals. Executive Summary Agency Problems Reportedly there are numerous corporate scandals throughout the years, for example Robert Maxwell , Barings , Enron , Lehman Brothers The principals will engage the agent to carry out some services on their behalf and would normally delegate some decision-making authority to the agents.
Better Essays words 1. We live in a society that is very individualistic, concentrating on whatever will bring pleasure and make us feel good. Recommend to your library. Rent with DeepDyve. Rent Article. Your Access Options. Forgotten your password? Article available in:. Vol 10, Issue 1, Mine Ozer and more Ownership structure and voluntary disclosure: A synthesis of empirical studies.
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Corporate finance. Davidson, W.
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