Difference between revisions of "Agency theory"

Revision as of 18:38, 27 August 2020

Agency theory

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-In political science and economics, the principal–agent problem or agency dilemma treats the difficulties that arise under conditions of incomplete and asymmetric information when a principal hires an agent, such as the problem of potential moral hazard and conflict of interest, inasmuch as the principal is—presumably—hiring the agent to pursue its, the principal's, interests.
+Agency theory
-The underlying view of mankind is that managers are:
-* Lazy
-* Acting in self interest
-* Risk avoiding
-Shareholders are:
-* Risk neutral
-* Want to maximize share holder value
-<html>
-<img src="/static/files/MBI/Module%209/Principal_agent.png" width=400>
-</html>
-Part of [[M9-S3 - Costs of organizations|M9-S3 - Costs of organizations]]
-See also: http://en.wikipedia.org/wiki/Principal-agent_problem
 [[Category:finance]]