Open AccessThe Legal Meaning Of Agency And Its Implications For Finance Theory
Author(s) -
Donald Margotta
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v6i1.6316
Subject(s) - shareholder , agency (philosophy) , principal–agent problem , corporation , meaning (existential) , finance , business , agency cost , accounting , law and economics , economics , corporate governance , sociology , epistemology , social science , philosophy
Agency theory in the finance literature is based on the assumption that an agency relationship exists between a firms managers, the agents, and its shareholders, the principals. This paper demonstrates that, in a legal sense, no formal agency relationship exists between managers and shareholders. Legal theory views managers as agents of the corporation rather than of shareholders, and the paper discusses the implications of these differences for finance theory.