Authors : Saeid Homayoun and Sakine Homayoun
Abstract: This study provides an overview of the research in the field of agency theory and corporate governance. This research is aimed to extend existing research contributes to the agency theory literature and particularly, the growing body of literature of corporate governance mechanisms. The agency theory suggests that corporate governance can reduce agency costs which in turn leads to improved firm performance. The problem that occurs is known as the principal-agent problem where two parties, the principal and the agent. The separation of ownership and control in the open financial system can result in the agency problem between management and shareholders. The separation of control and ownership in corporations has caused agency problems and a series of corporate governance mechanisms have been implemented to mitigate them. The primary objective of corporate governance can play an important role in minimizing the agency problem and ensuring that management’s interests are aligned with those of shareholders. The agency theory implies that the board of directors is elected to manage the potential conflict of interests between management and shareholders.
Saeid Homayoun and Sakine Homayoun, 2015. Agency Theory and Corporate Governance. International Business Management, 9: 805-815.