Open AccessManagerial Decisions, Internal Organization Structure, And Agency Considerations
Author(s) -
George P. Tsetsekos
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v4i4.6394
Subject(s) - agency cost , agency (philosophy) , multinational corporation , business , organizational structure , risk aversion (psychology) , industrial organization , accounting , microeconomics , economics , finance , management , financial economics , expected utility hypothesis , corporate governance , philosophy , epistemology , shareholder
This paper deals with issues related to productive inefficiencies that occur at a divisional level of a multinational firm. More specifically, the paper introduces an additional consideration in the agency relationship, namely, the internal organization structure. It is argued that the internal organization structure imposes restrictions on the behavior of divisional managers resulting in financial decisions characterized by short-term orientation and risk aversion. These suboptimal financial decisions generate organizational costs, called managerial regulatory costs, which should be distinguished from agency-type costs.