Agency Theory

Stefan Linder, Nicolai Juul Foss

    Research output: Working paperResearch

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    Abstract

    Agency theory studies the problems and solutions linked to delegation of tasks from principals to agents in the context of conflicting interests between the parties. Beginning from clear assumptions about rationality, contracting and informational conditions, the theory addresses problems of ex ante (“hidden characteristics”) as well as ex post information asymmetry (“hidden action”), and examines conditions under which various kinds of incentive instruments and monitoring arrangements can be deployed to minimize the welfare loss. Its clear predictions and broad applicability have allowed agency theory to enjoy considerable scientific impact on social science; however, it has also attracted considerable criticism.
    Original languageEnglish
    Place of PublicationFrederiksberg
    PublisherDjøf Forlag
    Number of pages22
    ISBN (Print)9788791815898
    Publication statusPublished - Apr 2013
    SeriesSMG Working Paper
    Number7

    Keywords

    • Adverse Selection
    • Agency Costs
    • Compensation
    • Conflict of Interest
    • Contracting
    • Corporate Governance
    • Delegation
    • Hidden Action
    • Hidden Characteristics
    • Incentive Intensity
    • Information Assymmetry
    • Informativeness
    • Monitoring
    • Mora Hazard
    • Motivation
    • Nexus of Contracts
    • Pay-for-Performance
    • Principal-agent Relationship
    • Second-best Solution

    Cite this

    Linder, S., & Foss, N. J. (2013). Agency Theory. Djøf Forlag. SMG Working Paper, No. 7 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2255895