Agency Theory

Discipline: Economics

Agency theory, developed in the 1970s, focuses on the way the central management of a firm manages its relations and enters into contractual arrangements with its divisional managers.

The conditions under which subordinate agents work with corporate managers may directly influence the behavior of the firm.

Issues such as remuneration, accounting techniques or risk-taking are among the major concerns of both parties in this relationship.

Also see: bureaucracy, theory of the growth of the firm, organization theory, managerial theories of the firm, theory of the firm

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