Advances in Economics, Management and Political Sciences
- The Open Access Proceedings Series for Conferences
Proceedings of the 7th International Conference on Economic Management and Green Development
Series Vol. 34 , 10 November 2023
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Principal-agent Relationship and Agency Problem
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Abstract
Progressively stricter requirements of labor division have led to the blossom of the principal-agent model, where differences in objective functions between the principal and the agent, as well as information asymmetry, often hinder the principal from maximizing their utility and can result in potential harm to both parties and social welfare. This paper aims to analyze the endogenous causes and issues resulting from the principal-agent model and proposes solutions. Additionally, the shareholder-CEO relationship in finance is applied as a specific case of the principal-agent model for further analysis. Through the construct of a simple model and a signaling mechanism pondering more realistic elements, the negative effect of information asymmetry can be weakened. Lastly, based on the findings of this paper and existing empirical research, the article proposes specific schemes for the above-mentioned mechanism and discusses their implementation and implications. The investigation of principal-agent issues and the proposal of appropriate countermeasures are of great significance and are always frontier concerns for both academia and society.
Keywords
principal-agent model, information asymmetry, agency problem
References
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Data Availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
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- Volume Title
- Proceedings of the 7th International Conference on Economic Management and Green Development
- ISBN (Print)
- 978-1-83558-089-9
- ISBN (Online)
- 978-1-83558-090-5
- Published Date
- 10 November 2023
- Series
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- 2754-1169
- ISSN (Online)
- 2754-1177
- DOI
- 10.54254/2754-1169/34/20231678
- Copyright
- 10 November 2023
- Open Access
- This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited