Agency Theory

The concept of  substance theory originated from the work of Adolf Augustus Berle and Gardiner Coit Means, who were discussing the issues of the agent and pattern as early as 1932. Berle and Means explored the concepts of agency and their applications toward the using of large corporations. They saw how the interests of the directors and managers of a given firm disaccord from those of the owner of the firm, and used the concepts of agency and principal to explain the origins of those conflicts.
Michael C. Jensen and William Meckling mold the work of Berle and Means in the context of the risk-sharing research ordinary in the 1960s and 70s to develop agency theory as a formal concept. Jensen and Meckling formed a school of popular opinion arguing that corporations are structured to minimize the costs of get agents to follow the direction and interests of the principals.
Agency theory essentially acknowledges that incompatible parties involved in a given situation with the aforesaid(prenominal) given goal volition have unalike motivations, and that these different motivations can manifest in divergent ways. It states that there will always be partial goal conflict among parties, skill is inseparable from effectiveness, and information will always be slenderly asymmetric between principal and agent.



 Agency theory has been successfully applied to a myriad disciplines including accounting, economics, politics, finance, marketing, and sociology.
Research on agency theory has had several findings. Most notably, an agent is more possible to adopt the goals of the principal, and thus behave in the interest of the principal, when the scram is outcome-based. Also, when the agent is aware of a mechanism in ordinate that allows the principal to verify the behavior of the agent, he is more liable(predicate) to comply with the goals of the principal.
Furthermore, outcome uncertainty has a positive kinship to behavior-based contracts, while there is a negative relationship to outcome-based contracts....If you neediness to get a full essay, order it on our website: Orderessay



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