11 terms

Agency Theory - Family Business

STUDY
PLAY
who wrote agency theory?
Berle & Means
Schulze
Principle
owner
Agent
Manager
Entrenchment
when family ties exist between owners and agents executive entrenchment (reluctance to transfer power to others) increases (thus increasing agency costs)
Adverse Selection
secret agendas or hiding informations that employers need to properly evaluate an applicants quality or worth
Opportunistic Behavior
acting upon privileged information
Altruism
the concern for the welfare of others
Traditional View of Agency Theory
Natural alignment of owners and managers (the agents) decreases the need for formal supervision of agents and for elaborate governance mechanisms, thus reducing agency costs of ownership for family firms
Agency as it relates to family business
the altruism of owner-managers leads to increased agency costs
How can agency costs be avoided?
the use of certain managerial and governance practices through a board of directors consisting of family and non-family members
How its Related to RBV
the concept of familiness (unique bundle of resources) would contribute to lower agency costs, as controls to monitor our agents. e.g. governance
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