Agency Theory: A Critical Review

Abstract

The agency theory has interested several disciplines: accounting, finance, economics, law, political science, strategy or organizational psychology. This theory, which explains the relations between owners and managers, needs to be revisited in the light of current debates on the performance of companies and the remuneration of their CEOs.This article highlights the developments in agency theory since Adam Smith postulate until today, and revisits the different forms of agency problem and their challenges for corporate governance.

Keywords:Agency theory, agency cost, Principal-agent problem, Information asymmetry, Corporate governance