Ill. Agency Theory (Ross and Mitnick, 1972)
Agency theory is the branch of financial economics that looks at conflicts of interest between: shareholders and manager of companies, and shareholders and bond holders. The theory explains the relationship between principals and agents, such as:
1. Conflicts of interest between manager and shareholders
2. Self-interest behavior
3. Mechanisms for dealing with shareholder manager conflicts
4. Cost of shareholder management conflict
5. Agency and ethics