Logged out
Access All our Essays in an Instant
Swap your work for FREE access, or pay £4.99 for instant access
Does the existence of the principal-agent relationship within the firm contradict the assumption of profit maximisation?
Member rating: No Rating | Words: | Submitted: Fri Jan 28 2005
Page Preview
On the left is an image preview of every page of this document, and below are the first 150 words with formatting removed:
Does the existence of the principal-agent relationship within the firm contradict the assumption of profit maximisation? This essay will be looking into the whether the existence of the principal-agent relationship within the firm contradicts the assumption of profit maximisation. One of the features of modern complex firms is that principals (owners) have to employ agents (managers/workers) to carry out certain duties within the firm. Workers are agents of management, junior managers are agents of senior managers, senior managers are agents of directors, who themselves are shareholders. From this we can see that in large firms there is often a complex chain of principle-agent relationships. The need for agents could be for many reasons for example the firm may be too large for the principal to manage on his/her own, and as a result require many levels of managerial hierarchy in order for it to run effectively. Or it could be because the...
To see the full version of this document, and 145,348 others
