Beruflich Dokumente
Kultur Dokumente
Introduction History Definition Alternate name(s) Main dependent Main independent Diagram/schematic of theory Links from this theory to other theories Conclusion
Theory Name Acronym construct(s)/factor(s) construct(s)/factor(s) Concise description of theory Originating author(s) Seminal articles Originating area
Originating author(s)
One party (termed the principal) seeks to achieve some outcome but requires the assistance of another (termed the agent) to carry out a necessary activity (Scott, 1998)
Best Productivity
The
central dilemma investigated by agency theorists is how to get the agent to act in the best interests of the principal when the agent has an information advantage over the principal and divergent goals or interests (Chong)
Agent:
The individual, or group of individuals, who set out to execute an activity or set of activities to fulfill the principals goals or objectives. (Eisenhardt, 1989)
Asymmetric Information:
A difference in information between two parties. Many economists rely on economic models that assume both parties in a transaction have perfect information. But information in the real market is often asymmetric (Chong).
Managerial Application
Alternate name:
Principal-Agent Problem
Information Asymmetry
Agency problem:
Goals
of principal and agent are different Principal cannot assess the agents behaviour, i.e. the outcome
Unit of analysis Contract between principal and agent Human assumptions Self interest Bounded rationality Risk aversion Organizational assumptions Partial goal conflict among participants Efficiency as the effectiveness criterion Information Assumption Information as a purchasable commodity Contracting problem Agency (moral hazard and adverse selection) Risk sharing Problem domain Relationships in which the principal and agent have partly differing goals and risk preferences (e.g. compensation, regulation, leadership, impression management, whistle blowing, vertical integration, transfer pricing)
Conclusion
Programmability:
the degree to which appropriate behavior by the agent can be specified in advance (Eisenhardt, 1989) Programmed behavior is easier to observe
Information systems:
Budgeting systems, reporting procedures, supervisory boards Positively related to programmability Information asymmetry decreases over time in a principal/agent relationship
Measurability of outcomes:
References
Chong, Jan. Visited October 2006. Agency Theory - Review. http://www.stanford.edu/~jchong/articles/quals/Agency Theory - Review.doc
Eisenhardt, K. M. 1989. Agency Theory: An Assessment and Review. The Academy of Management Review, 14(1): 57-74.