Alchian and demsetz 1972, ross 1973, arrow 1974, jensen and meckling 1976, and, from a rather different perspective, nelson and winter 1982, summarizing their work in the 1970s. Managerial behavior, agency costs and ownership structure, journal of financial economics 3 1976 305360. The antecedents of their work are in coase 1937, 1960. Empirical evidence of risk shifting in financially. Shareholders may not like the personal interests of leaders as it will. Smith 1937 to berle and means 1932 and jensen and meckling 1976. The starting point for the analysis is the agency theory by jensen and. Jensen and meckling 1976 argue that ownership structure, executive com pensation structure, and board composition are determined by each other and by the nature of a firms business e. Specifically, agency theory is directed at the ubiquitous agency relationship, in which one party the principal delegates work to another the agent, who performs that work. Jensen s bestknown work is the 1976 paper he coauthored with william h. Agency and firms ownership structure focus is on the relationship between upperlevel management and stockholders categories which overlap when the owner is the manager.
Center for research in government policy and business working paper. This happens because managers tend to try to give priority to private interests. Jensen and meckling 1976 identify three agency costs for principals to monitor agent behaviour. Fama and jensen 1983 explain that some agency costs are avoidedreduced by the allocation of rights within organisational structures. Agency theory revolves around the issue of the agency problem and its solution. Fligstein and freeland 1995 argue that the most efficient contract used to govern the principalagent relationship is determined by agency theory. The riskshifting asset substitution problem introduced by jensen and meckling 1976 suggests that shareholders can transfer wealth from bondholders by engaging in risky projects.
Jensen and meckling 1976 presentation by emma xu and michael farrell october 12 2015. Our base case is jensen and meckling s 1976 zero agencycost firm, where the manager is the firms sole shareholder. Pdf on feb 1, 1973, stephen a ross and others published the economic. Agency theory is a useful framework for designing governance and controls in organisations. Jensen dan meckling 1976 menjelaskan hubungan keagenan sebagai agency relationship as a contract under which one or more person the principals engage another person the agent to perform some service on their behalf which involves delegating some decision making authority to the agent. Monitoring cost adalah biaya yang timbul dan ditanggung oleh principal untuk memonitor perilaku agent, yaitu untuk mengukur, mengamati, dan mengontrol perilaku agent. Jensen and meckling 1976 put forward the theory of the agency, explained that the interests of management and shareholder interests often conflict, so that conflicts can arise between them. Agency theory and ownership structure estimating the effect of ownership structure on firm performance economics masters thesis tuomas laiho 2011. Executive compensation structure, ownership, and firm. Managerial behavior, agency costs and ownership structure jensen, m. Agency costs and ownership structure the seminal contributions of jensen and meckling 1976 on agency costs have called into attention the social and private costs of an agents actions due to. Managerial behavior, agency costs and ownership structure jensen and meckling, jfe, 1976 about 3400. Meckling 1922 may 15, 1998 was an american economist and professor of management and government policy and dean at the simon business school, university of rochester, working in the areas of managerial economics and the economic analysis of law, and his work received international recognition source. Jensen meckling agency theory presentation luoma slideshare.
The intention of these contracts is that all the parties acting in their selfinterest are motivated to maximize the value of the organization, reducing the agency costs and adopting accounting methods that most efficiently reflect their own performance deegan, 2004. Managerial behavior, agency costs and ownership structure by. Jensens and mecklings 1976 model on agency costs and ownership structure holds a central role in the corporate governance literature. Using the url or doi link below will ensure access to this page indefinitely. In this paper we draw on recent progress in the theory of 1 property rights, 2 agency, and 3 finance to develop a theory of ownership structure for the firm. The starting point for the analysis is the agency theory by jensen and meckling 1976, which predicts that higher levels of managerial ownership. Shareholder interests will be safeguarded only where the chair of the board is.
The key insight of jensen and meckling 1976 was to model the relationship between own ers and managers similar to one between a principal and an agent. In barzel 1982s theory of the firm, drawing on jensen and meckling 1976, the firm emerges as a means of centralising monitoring and thereby avoiding costly redundancy in that function since in a firm the responsibility for monitoring can be centralised in a way that it cannot if production is organised as a group of workers each acting. Jensen, michael and william meckling 1976, theory of the firm. Managerial behavior, agency costs and ownership structure july 1, 1976. Managerial behavior, agency costs and ownership structure michael c. Managerial behavior, agency costs and ownership structure. Agency theory jensen and meckling 1976 stocks debt. Masulis 1976 and jensen and meckling 1976 introduced this riskshifting asset substitution problem, many theoretical papers have sought to identify factors that can mitigate the problem e. The board of directors has an important function here and in particular the relationship between the chairperson and the chief executive officer is key tricker 1984. The starting point for the analysis is the agency theory by jensen and meckling 1976, which predicts that higher levels of managerial ownership structure. We retain the notion of maximizing behavior on the part of all individuals in the analysis that follows. One of the most widely cited economics papers of the last 40 years, it implied the theory of the public corporation as an ownerless entity, made up of only contractual relationships. Empirical evidence of risk shifting in financially distressed.
Managerial behavior, agency costs, and ownership structure 1976, published in the journal of financial economics by financial economist michael c. Explain their view, highlighting the different types of decision rights in existence. Managerial behavior, agency cost and ownership structure. Harvard business school 1985 university of rochester 19671988 u of chicago, ph. Managerial behavior, agency costs and ownership structure jensen and meckling 1976 presentation by emma xu and michael farrell. Governance, residual claims and organizational forms harvard university press, december 2000.
As with all theories, we can learn something from agency theory and transactioncosts economics, since they emphasize something others hide. Jensen and meckling 1976 quote from adam smith 1776. It is fair to say that the emerging economics of organization is now one of the richest and most rapidly expanding fields in modern economics. Agency theory jensen and meckling 1976 free download as powerpoint presentation. The modern literature on the problem dates back at least to berle and means 1932. Jensen dan meckling 1976 membagi biaya keagenan ini menjadi. Q northholland publishing company theory of the firm. Managerial behavior, agency costs and ownership structure, journal of financial economics 3, pp.
Teori agensi jensen dan meckling 1976 menjelaskan hubungan keagenan di dalam teori agensi agency theory bahwa perusahaan merupakan kumpulan kontrak nexus of contract antara pemilik sumber daya ekonomis principal dan manajer agent yang mengurus penggunaan dan pengendalian sumber daya tersebut. The striking insight of alchian and demsetz 1972 and jensen and meckling 1976 is in viewing the firm as a set of contracts among factors of production. Sep 27, 2014 managerial behavior, agency costs and ownership structure by. Managerial behavior, agency costs and ownership structure agency costs of outside equity in this paper managerial behavior, agency costs and the ownership structure are modelled. Jensen meckling 1976 free download as powerpoint presentation. While the literature of economics is replete with references to the theory of the firm, the material generally subsumed under that heading is not actually a theory of the firm but rather a theory of markets in which firms are important actors. The concept offers a solid introduction to the topic by evaluating its strengths and weaknesses and uses case study evidence to demonstrate how the theory has been applied in different industries and contexts. Jensen and mecklings famous article on agency costs analyzed by tero luoma. Unduh sebagai ppt, pdf, txt atau baca online dari scribd.
Received january 1976, revised version received july 1976. In separation of ownership and control fama and jensen, 1983, we argue that this agency problem is 5 see, for example, fama 1978. In agency theory terms, the owners are principals and the managers are agents and there is an agency loss which is the extent to which returns to the residual claimants, the owners, fall below what they would be if the principals, the owners, exercised direct control of the corporation jensen and meckling 1976. American economic association agency costs of free cash flow, corporate finance, and takeovers authors. This thesis tries to answer the question whether ownership structure matters for. Jensen, foundations of organizational strategy, harvard university press, 1998. Contemporary applications of agency theory were advanced with the publication of theory of the firm.
The jensen and meckling 1976, hereinafter jm theory explains. Managerial behavior, agency costs and ownership structure jensen and meckling 1976 presentation by emma xu and michael farrell october 12 2015. Volume 3, issue 4, october 1976, pages 305360 theory of the firm. To the degree that an executive feels their future fortunes are bound to their. Jensen e meckling traduzido economia investimentos. Jensen and meckling 1976 adopt a very simplified view of the nature of the shareholdermanager relationship. Managerial behavior, agency costs and ownership structure author links open overlay panel michael c. Jensen and meckling 1976 aptly recognized that the organization is a nexus of contracts. Managerial behavior, agency costs and ownership structurejensen, m. Jensen and meckling 4 1976 behavior as well as rejecting the more specific profitmaximizing model. Jensen, michael 1986, agency costs of free cash flow, corporate finance, and. This agency problem has attracted a great deal of interest in the literature, mainly in attempting to identify ways to mitigate the problem, and to assess its.
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