InvestorWords.com
agency theory
Definition
A theory explaining the relationship between principals, such as a shareholders, and agents, such as a company's executives. In this relationship the principal delegates or hires an agent to perform work. The theory attempts to deal with two specific problems: first, that the goals of the principal and agent are not in conflict (agency problem), and second, that the principal and agent reconcile different tolerances for risk.
Recommended Articles from InvestorGuide.com
Related Videos
Featured Advertiser
Get our free Term of the Day newsletter!



