This article intends to review the theoretical aspects and empirical evidences made on agency theory. It is aimed to explore the main ideas, perspectives, problems and issues related to the agency theory through a literature survey. It discusses the theoretical aspects of agency theory and the various concepts and issues related to it and documents empirical evidences on the mechanisms that diminish the agency cost. The conflict of interest and agency cost arises due to the separation of ownership from control, different risk preferences, information asymmetry and moral hazards. The literatures have cited many solutions like strong ownership control, managerial ownership, independent board members and different committees can be useful in controlling the agency conflict and its cost. This literature survey will enlighten the practitioners and researchers in understanding, analysing the agency problem and will be helpful in mitigating the agency problem.
AdamsJ. (1996). Principals and agents, colonialists and company men: The decay of colonial control in the Dutch East Indies. American Sociological Review, 61(1), 12–28.
2.
AgrawalA.KnoeberC. R. (1996). Firm performance and mechanisms to control agency problems between managers and shareholders. Journal of Financial and Quantitative Analysis, 31(3), 377–397.
3.
AhmedA. (2009). Managerial ownership concentration and agency conflict using logistic regression approach: Evidence from Bursa Malaysia. Journal of Management Research, 1(1), 1–10.
4.
AlchianA.DemsetzH. (1972). Production, information costs, and economic organization. The American Economic Review, 62(5), 777–795.
5.
AngJ. S.ColeR. A.LinJ. W. (2000). Agency cost and ownership structures. The Journal of Finance, 55(1), 81–106.
6.
ArrowK. (1971). Essays in the theory of risk bearing. Chicago, IL: Markham.
7.
BarneaA.HaugenR. A.SenbetL. W. (1985). Agency problems and financial contracting. New Jersey: Prentice Hall Inc.
8.
BergenM.DuttaS.WalkerO. C.Jr. (1992). Agency relationships in marketing: A review of the implications and applications of agency and related theories. Journal of Marketing, 56(3), 1–24.
9.
BerleA.MeansG. (1932). The modern corporation and private property. New York, NY: Macmillan.
10.
BurkartM.GrombD.PanunziF. (1997). Large shareholders, monitoring, and the value of the firm. Quarterly Journal of Economics, 112(3), 693–728.
11.
CaiC.HillerD.TianD.WuQ. (2015). Do audit committees reduce the agency costs of ownership structure?Pacific-Basin Finance Journal, 35(A), 225–240.
12.
ChowdhuryD. (2004). Incentives, control and development: Governance in private and public sector with special reference to Bangladesh. Dhaka: Viswavidyalay Prakashana Samstha.
13.
CoreE.HolthausenR.LarckerD. (1999). Corporate governance, chief executive compensation, and firm performance. Journal of Financial Economics, 51(3), 371–406.
14.
DailyC. M.DaltonD. R.RajagopalanN. (2003). Governance through ownership: Centuries of practice, decades of research. Academy of Management Journal, 46(2), 151–158.
15.
DamodaranA. (1997). Corporate finance. New York, NY: John Wiley.
16.
DavidsonW.BouresliA.SinghM. (2006). Agency costs, ownership structure and corporate governance in pre and post-IPO firms. Corporate Ownership & Control, 3(3), 88–95.
17.
DemsetzH.LehnK. (1985). The structure of corporate ownership: Causes and consequences. Journal of Political Economy, 93(6), 1155–1177.
18.
DonaldsonL. (1990). The ethereal hand: Organizational economics and management theory. Academy of Management Review, 15(3), 369–381.
19.
DoukasJ. A.KimC.PantzalisC. (2000). Security analysis, agency costs and company characteristics. Financial Analysts Journal, 56(6), 54–63.
20.
EisenhardtK. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.
21.
FaccioM.LangL. H. P.YoungL. (2001). Dividends and expropriation. American Economic Review, 91(1), 54–78.
22.
FamaE. (1980). Agency problems and the theory of the firm. Journal of Political Economy, 88(2), 288–307.
23.
FamaE.JensenM. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301–325.
24.
FauziF.LockeS. (2012). Do agency costs really matter? A non-linear approach of panel data. Asian Journal of Finance & Accounting, 4(1), 359–376.
25.
FirthM.FungM.RuiM. (2006). Firm performance, governance structure, and top management turnover in a transitional economy. Journal of Management Studies, 43(6), 1289–1330.
26.
FlemingG.HeaneyR.McCoskerR. (2005). Agency costs and ownership structure in Australia. Pacific-Basin Finance Journal, 13, 29–52.
27.
FlorackisC. (2008). Agency costs and corporate governance mechanisms: Evidence for UK firms. International Journal of Managerial Finance, 4(1), 37–59.
28.
FlorackisC.OzkanA. (2009). The impact of managerial entrenchment on agency costs: An empirical investigation using UK panel data. European Financial Management, 15(3), 497–528.
29.
FriermanM.ViswanathP. (1994). Agency problems of debt, convertible securities, and deviations from absolute priority in bankruptcy. Journal of Law and Economics, 37(2), 455–476.
30.
GilsonR.GordonJ. (2003). Controlling controlling shareholders. University of Pennsylvania Law Review, 152(2), 785–843.
31.
GrossmanS.HartO. (1983). An analysis of the principal–agent problem. Econometrica, 51(1), 7–45.
32.
GulS.SajidM.RazzaqN.AfzalF. (2012). Agency cost, corporate governance and ownership structure (the case of Pakistan). International Journal of Business and Social Science, 3(9), 268–277.
33.
HammondT.KnottJ. (1996). Who controls the bureaucracy? Presidential power, congressional dominance, legal constraints, and bureaucratic autonomy in a model of multi-institutional policy-making. Journal of Law, Economics, and Organization, 12(1), 119–166.
34.
HarrisM.RavivA. (1978). Some results on incentive contracts with applications to education and employment, health insurance, and law enforcement. The American Economic Review, 68(1), 20–30.
35.
HastoriH.SiregarH.SembelR.MaulanaA. (2015). Agency costs, corporate governance and ownership concentration: The case of agro-industrial companies in Indonesia. Asian Social Science, 11(18), 311–319.
36.
HenryD. (2010). Agency costs, ownership structure and corporate governance compliance: A private contracting perspective. Pacific-Basin Finance Journal, 18(1), 24–46.
37.
JelinekK.StuerkeP. (2009). The nonlinear relation between agency costs and managerial equity ownership: Evidence of decreasing benefits of increasing ownership. International Journal of Managerial Finance, 5(2), 156–178.
38.
JensenM. (1986). Agency cost of free cash flow, corporate finance, and takeovers. American Economic Review, 76(2), 323–329.
39.
JensenM.MecklingW. (1976). Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3(4), 305–360.
40.
KiniO.KracawW.MianS. (2004). The nature of discipline by corporate takeovers. Journal of Finance, 59(4), 1511–1552.
41.
KiserE. (1999). Comparing varieties of agency theory in economics, political science, and sociology: An illustration from state policy implementation. Sociological Theory, 17(2), 146–170.
42.
KiserE.TongX. (1992). Determinants of the amount and type of corruption in state fiscal bureaucracies: An analysis of late imperial China. Comparative Political Studies, 25(3), 300–331.
43.
KosnikR.BittenhausenK. (1992). Agency theory and motivational effect of management compensation. Group and Organization Management, 17(3), 309–330.
44.
LiH.CuiL. (2003). Empirical study of capital structure on agency costs in Chinese listed firms. Nature and Science, 1(1), 12–20.
45.
LiptonM.LorschJ.W. (1992). A modest proposal for improved corporate governance. Business Lawyer, 48(1), 59–77.
46.
LoganM. S. (2000). Using agency theory to design successful outsourcing relationships. International Journal of Logistics Management, 11(2), 21–32.
47.
McKnightP. J.WeirC. (2009). Agency costs, corporate governance mechanisms and ownership structure in large UK publicly quoted companies: A panel data analysis. The Quarterly Review of Economics and Finance, 49(2), 139–158.
48.
MillerS. (2009). Governance mechanisms as moderators of agency costs in apre-soxenvironment. Journal of Business & Economics Research, 7(10), 15–32.
49.
MitnickB. (1975). The theory of agency: The policing ‘paradox’ and regulatory behavior. Public Choice, 24(1), 27–42.
50.
MorckR.ShleiferA.VishnyR. (1988). Management ownership and market valuation. Journal of Financial Economics, 20(1–2), 293–315.
51.
MustaphaM.AhmadA. (2011). Agency theory and managerial ownership: Evidence from Malaysia. Managerial Auditing Journal, 26(5), 419–436.
52.
MyersS. (2000). Outside equity. Journal of Finance, 55(3), 1005–1037.
53.
ParkJ. J. (2009). Shareholder compensation as dividend. Michigan Law Review, 108(3), 323–371.
54.
PearceJ. A.ZahraS. A. (1991). The relative power of the CEOs and boards of directors: Associations with corporate performance. Strategic Management Journal, 12(2), 135–153.
55.
PepperA.GoreJ. (2012). Behavioral agency theory new foundations for theorizing about executive compensation. Journal of Management, 41(4), 1045–1068.
56.
PerrowC. (1986). Complex organizations. New York, NY: Random House.
57.
RashidA. (2013). CEO duality and agency cost: Evidence from Bangladesh. Journal of Management and Governance, 17(4), 989–1008.
58.
RashidA. (2015). Revisiting agency theory: Evidence of board independence and agency cost from Bangladesh. Journal of Business Ethics, 130(1), 181–198.
59.
RashidA. (2016). Managerial Ownership and Agency Cost: Evidence from Bangladesh. Journal of Business Ethics, 137(6), 609–621.
60.
RonenJ.BalchandranK. (1995). Agency theory: An approach to incentive problems in management accounting. Asian Review of Accounting, 3(1), 127–151.
61.
RosensteinS.WyattJ. G. (1990). Outside directors, board independence and shareholder wealth. Journal of Financial Economics, 26(2), 175–191.
62.
RossS. (1973). The economic theory of agency: The principal’s problem. American Economic Review, 63(2), 134–139.
63.
SandersG.CarpenterM. (2003). A behavioral agency theory perspective on stock repurchase program announcements. Academy of Management Journal, 46(3), 160–178.
64.
SanjayaP.ChristiantiI. (2012). Corporate governance and agency cost: Case in Indonesia. Paper presented at the 2nd International Conference on Business, Economics, Management and Behavioral Sciences (BEMBS’2012), 13–14 October 2012, Bali, Indonesia.
65.
SenA. (1987). The standard of living. Cambridge: Cambridge University Press. Shapiro, S. (2005). Agency theory. Annual Review Sociology, 31(1), 263–284.
66.
ShleiferA.VishnyR. W. (1997). A survey of corporate governance. Journal of Finance, 52(2), 737–789.
67.
SiddiquiM.RazzaqN.MalikF.GulS. (2013). Internal corporate governance mechanisms and agency cost: Evidence from large KSE listed firms. European Journal of Business and Management, 5(23), 103–109.
68.
SinghM.DavidsonN. (2003). Agency cost, ownership structure and corporate governance mechanisms. Journal of Banking & Finance, 27(5), 793–816.
69.
SmithA. (1937[1776]). The wealth of nations. Edited by Edwin Cannan, 1904. New York, NY: Modern Library.
70.
SonginiL.GnanL. (2015). Family involvement and agency cost control mechanisms in family small and medium-sized enterprises. Journal of Small Business Management, 53(3), 748–779.
71.
SpenceA.ZeckhauserR. (1971). Insurance, information, and individual action. American Economic Review, 61(2), 380–387.
72.
SuY.XuD.PhanP.H. (2008). Principal–Principal conflict in the governance of the Chinese public corporation. Management and Organization Review, 4(1), 17–38.
73.
TateW.EllramL.BalsL.HartmannE.ValkW. (2010). An agency theory perspective on the purchase of marketing services. Industrial Marketing Management, 39(5), 806–819.
74.
WassermanN. (2006). Stewards, agents, and the founder discount: Executive compensation in new ventures. Academy of Management Journal, 49(5), 960–976.
75.
WattsR. L.ZimmermanJ. L. (1983). Agency problems, auditing, and the theory of the firm: Some evidence. Journal of Law and Economics, 26(3), 613–634.
76.
WeingastB.MoranM. (1983). Bureaucratic discretion or congressional control? Regulatory policy making by the federal trade commission. Journal of Political Economy, 91(5), 765–800.
77.
WellalageN.LockeS. (2011). Agency costs, ownership structure and corporate governance mechanisms: A case study in New Zealand unlisted small companies. Journal of Business Systems, Governance and Ethics, 6(3), 53–65.
78.
WellalageN.LockeS. (2012). An empirical investigation of agency costs and ownership structure in unlisted small businesses. New Zealand Journal of Applied Business Research, 10(2), 37–48.
79.
WilliamsonO. E. (1985). The economic institutions of capitalism. New York, NY: Free Press.
80.
WilliamsonO. E. (1988). Corporate finance and corporate governance. Journal of Finance, 43(3), 567–591.
81.
WilsonR. (1968). On the theory of syndicates. Econometrica, 36(1), 119–132.
82.
WisemanR.Gomez-MejiaL. (1998). A behavioral agency model of managerial risk taking. Academy of Management Review, 23(1), 133–153.
83.
XuL.ZhuT.LinY. (2005). Politician control, agency problems, and ownership reform: Evidence from China. Economics of Transition, 13(1), 1–24.
84.
YegonC.SangJ.KiruiJ. (2014). The impact of corporate governance on agency cost: Empirical analysis of quoted services firms in Kenya. Research Journal of Finance and Accounting, 5(12), 145–154.
85.
ZajacE. J.WestphalJ. D. (1994). The costs and benefits of managerial incentives and monitoring in large U.S. corporations: When is more not better?Strategic Management Journal, 15(1), 121–142.
86.
ZeckhauserR.PoundJ. (1990). Are large shareholders effective monitors? An investigation of share ownership and corporate performance. In HubbardG. (Ed.), Asymmetric information, corporate finance, and investment (pp. 149–180). Chicago, IL: University of Chicago Press.
