Advances in Economics, Management and Political Sciences

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Proceedings of the 7th International Conference on Economic Management and Green Development

Series Vol. 34 , 10 November 2023


Open Access | Article

Principal-agent Relationship and Agency Problem

Xinyi Zhou * 1
1 East China Normal University

* Author to whom correspondence should be addressed.

Advances in Economics, Management and Political Sciences, Vol. 34, 74-82
Published 10 November 2023. © 2023 The Author(s). Published by EWA Publishing
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.
Citation Xinyi Zhou. Principal-agent Relationship and Agency Problem. AEMPS (2023) Vol. 34: 74-82. DOI: 10.54254/2754-1169/34/20231678.

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
© 2023 The Author(s)
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

Copyright © 2023 EWA Publishing. Unless Otherwise Stated