Agency Theory

Stefan Linder; Nicolai Juul Foss

doi:10.1016/B978-0-08-097086-8.73038-8

Agency Theory

Stefan Linder, Nicolai Juul Foss

ESSEC Business School

Research output: Chapter in Book/Report/Conference proceeding › Encyclopedia chapter › Research › peer-review

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 language	English
Title of host publication	International Encyclopedia of the Social & Behavioral Sciences
Editors	James D. Wright
Volume	1
Place of Publication	Amsterdam
Publisher	Elsevier
Publication date	2015
Edition	2.
Pages	344-350
ISBN (Print)	9780080970875
DOIs	https://doi.org/10.1016/B978-0-08-097086-8.73038-8
Publication status	Published - 2015

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10.1016/B978-0-08-097086-8.73038-8

http://www.cbs.dk/bibliotek/databaser/int-encyclopedia-of-the-social-behavioral-sciences-2-edLicence: Unspecified

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Cite this

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title = "Agency Theory",

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 ({\textquoteleft}hidden characteristics{\textquoteright}) as well as ex post information asymmetry ({\textquoteleft}hidden action{\textquoteright}), 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.",

keywords = "Adverse selection, Agency costs, Compensation, Conflict of interest, Contracting, Corporate governance, Delegation, Hidden action, Hidden characteristics, Incentive intensity, Information asymmetry, Informativeness, Monitoring, Moral hazard, Motivation, Nexus of contracts, Pay for performance, Principal–agent relationship, Second-best solution",

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booktitle = "International Encyclopedia of the Social & Behavioral Sciences",

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TY - ENCYC

T1 - Agency Theory

AU - Linder, Stefan

AU - Foss, Nicolai Juul

PY - 2015

Y1 - 2015

N2 - 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.

AB - 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.

KW - Adverse selection

KW - Agency costs

KW - Compensation

KW - Conflict of interest

KW - Contracting

KW - Corporate governance

KW - Delegation

KW - Hidden action

KW - Hidden characteristics

KW - Incentive intensity

KW - Information asymmetry

KW - Informativeness

KW - Monitoring

KW - Moral hazard

KW - Motivation

KW - Nexus of contracts

KW - Pay for performance

KW - Principal–agent relationship

KW - Second-best solution

U2 - 10.1016/B978-0-08-097086-8.73038-8

DO - 10.1016/B978-0-08-097086-8.73038-8

M3 - Encyclopedia chapter

SN - 9780080970875

VL - 1

SP - 344

EP - 350

BT - International Encyclopedia of the Social & Behavioral Sciences

A2 - Wright, James D.

PB - Elsevier

CY - Amsterdam

ER -