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An agency cost is an economic concept that refers to the costs associated with the relationship between a "principal" (an organization, ... In theory, agents will ...
In economic theory, the principal-agent approach (also called agency theory) is part of the field contract theory. [36] [37] In agency theory, it is typically assumed that complete contracts can be written, an assumption also made in mechanism design theory. Hence, there are no restrictions on the class of feasible contractual arrangements ...
Jensen's best-known work is the 1976 Journal of Financial Economics article he co-authored with William H. Meckling, "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure". [11]
Transaction cost theory: costs incurred to organize an activity, especially regarding research of information, bureaucracy, communication etc. Agency theory: dilemmas connected to making decisions on behalf of, or that impact, another person or entity.
The basic theorem states that in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the enterprise value of a firm is unaffected by how that firm is financed. [2] [unreliable source?] This is not to be confused with the value of the equity of the firm.
The template seems to be Musk’s cost-cutting spree at Twitter, which he bought in 2022. Within two years, Musk had slashed the payroll by more than 75% and upended the whole business model.
The Government Accountability Office, a congressional watchdog agency, estimates that the U.S. government loses between $233 billion and $521 billion each year due to fraud and improper payments.
Contract theory in economics began with 1991 Nobel Laureate Ronald H. Coase's 1937 article "The Nature of the Firm". Coase notes that "the longer the duration of a contract regarding the supply of goods or services due to the difficulty of forecasting, then the less likely and less appropriate it is for the buyer to specify what the other party should do."