Agency theory - Financial definition
Financial acronyms
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Concise definition of the term agency theory
The analysis of principal-agent business relationships, wherein one person, an agent, acts on behalf of another person, a principal.
Comprehensive definition of the term agency theory
Agency theory is analyzing problems that can exist in agency relationships due to conflicting goals or different levels of appetite for risk.
The most common agency relationship in finance is the one between the shareholders (principal) and the executives (agents) of a company.