5.3 Agency Theory
Agency theory suggests that the firm can be viewed as loosely defined between
resource holders. An agency relation arises when multiple individuals hire other
individuals (agents) to perform some tasks and authorize them with decision-making.
Both the parties get very different targets, normally the agent possesses higher target
than that of the principal (Eisenhardt, 1989). Agency expenses are incurred to hire
agents in order to sustain an effective agency relationship.