engleski

Agency costs and principal control mechanisms

By the establishment of agency relationship between the principal and agent, assuming that both principal and agent are acting with the goal of utility maximization, and due to appearance of asymmetric information, moral hazard and wrong choices, it comes to the emergence of agency costs. Dichotomy of interest between owner and manager of company, theory tries to control by different mechanisms, but the most common solutions have been developed in terms of monitoring and various incentives by which the principal tries to control and direct the behavior of agent.

principal; agent; agency costs; control mechanisms

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