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Developing an Ownership Framework in the Organization

   

Added on  2020-04-07

10 Pages2849 Words135 Views
Running head: MANAGERIAL BEHAVIOR, AGENCY COSTS, OWNERSHIP STRUCTURETheory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure Name of the University:Name of the Student:Authors Note:

MANAGERIAL BEHAVIOR, AGENCY COSTS, OWNERSHIP STRUCTURE1IntroductionA rapid progress has been observed in the property rights, finance and agency theory fordeveloping an ownership framework in the organization. Moreover, the accounting theorieselaborate the determination of some specifications and optimal capital structure. This is inconsideration to credit agreements concept, company theories and supply side regardingextensiveness of the market problem (Agoglia et al. 2017). In account of the same, agency theoryanticipates to elaborate that the manager or owner of the organization gains mixed financialstructure. This includes equity claims and debts. This supports in choosing activities set fororganization in a way that total revenue of the organization is less. It might be the case that he was the only owner and the findings are independent devoidof the fact that the organization has its operation in monopolistic market or within competitiveproducts. Agency theory elaborates the reasons for which the managers are failing to increase thecompany value which is increasingly consistent with efficiency (Baik et al. 2015). The intentionof this essay is to evaluate the managerial behavior, agency costs and ownership structure whichwill support in elaborating agency theory from formal peer reviewed article. The article is chosenin the essay for elaborating accounting theories implication within the company is “Theory of theFirm: Managerial Behavior, Agency Costs, and Ownership Structure”.DiscussionThe article has an objective of maintaining an ownership structure theory for theorganization which centers on property rights theory, agency and finance theory. The article alsoelaborated the concept of agency cost, elaborated the relationship for control issue andinvestigated the agency cost nature (Beaudoin, Cianci and Tsakumis 2015). It explained

MANAGERIAL BEHAVIOR, AGENCY COSTS, OWNERSHIP STRUCTURE2existence of outside equity and debt in the organization. In addition, the article conducted aninnovative analysis of the organizations that signified effectiveness of their evaluation process.Such evaluation is conducted to reveal the factors affecting the insurance and generation ofequity and debt. The article revealed that agency relationship acts as a contract in which more than oneindividual gets associated with other person (agent) for offering some service on the behalf of theagent (Briamonte et al. 2017). This offers authority of decision making to the agent. In asituation where the contractual parties involved in the relationship acts as utility maximizersthere is high chance that they may not act towards the principal’s best interests. The article alsoelaborated that agency cost is related with residual loss so an agent’s bonding expenses andsupervising expenses are provided by the principal. Agency theory is implemented by organizations with increased efforts within everymanagement level. This theory is implemented within universities, mutual organizations,cooperatives, government authorities and unions. The article centered on analysis of agency costsrevealed from contractual agreements conducted by the owners and the company’s topmanagement (Devers and Sanders 2016). It is evaluated that people deal with normative issuestaking into account that just stocks and bonds can be issued as claims. This investigates theincentives collected from all the contractual parties and the aspects entering in equilibriumcontractual form determination. This explains the relationship between the company’s manager(agent) and the outer equity and debt holders (principals). Agency Costs of Equity

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