149516
Description
Mind Map by Shahid Musthafa, updated more than 1 year ago
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Created by Shahid Musthafa
over 11 years ago
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A: Agency Theory
- A supposition that explains the
relationship between principals and
agents in business. Agency theory is
concerned with resolving problems
that can exist in agency
relationships; that is, Between
principals (such as shareholders) &
agents of the principals (for
example, company executives).
- The two problems that
agency theory
addresses are:
- 1. the problems that arise when the
desires or goals of the principal and
agent are in conflict, and the principal
is unable to verify (because it difficult
and/or expensive to do so) what the
agent is actually doing
- 2. the problems that arise when the
principal and agent have different
attitudes towards risk. Because of
different risk tolerances, the principal
and agent may each be inclined to take
different actions.
- 1. the problems that arise when the
desires or goals of the principal and
agent are in conflict, and the principal
is unable to verify (because it difficult
and/or expensive to do so) what the
agent is actually doing
- The two problems that
agency theory
addresses are:
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