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Agency Theory (agency + theory)
Selected AbstractsTesting Agency Theory with Entrepreneur Effort and WealthTHE JOURNAL OF FINANCE, Issue 2 2005MARIANNE P. BITLER ABSTRACT We develop a principal-agent model in an entrepreneurial setting and test the model's predictions using unique data on entrepreneurial effort and wealth in privately held firms. Accounting for unobserved firm heterogeneity using instrumental-variables techniques, we find that entrepreneurial ownership shares increase with outside wealth and decrease with firm risk; effort increases with ownership; and effort increases firm performance. The magnitude of the effects in the cross-section of firms suggests that agency costs may help explain why entrepreneurs concentrate large fractions of their wealth in firm equity. [source] Is disclosure the right way to comply with stakeholders?BUSINESS ETHICS: A EUROPEAN REVIEW, Issue 1 2008The Shell case This paper is part of an ongoing research project and builds upon a previous one in which we explain the failure of the Agency Theory through the Shell case. In that, we analysed the behaviour of Shell managers, who reclassified oil reserves, playing with the share price because they owned share options. This previous paper established an important literature framework that is continued and organized to go deeper into our analysis in this paper. The goal here is to show that the way that is supposed to be the right tool to inform stakeholders , disclosure , is not enough, and even in the Shell case, no one would have noticed the problems with the oil reserves through the mere analysis of the company disclosure during the ,strange period' (1998,2003). The methodology used in this paper is lexical analysis, which seems to be an innovative and effective approach to the analysis of Corporate Social Disclosure, given the un-codified nature of the latter. The conclusions obtained highlight the problem of lack of transparency in the contents of corporate social disclosure: some firms avoid communicating crucial contents, some others twist the results in order to camouflage advantages to shareholders or managers. If it is like this for disclosing firms, what is happening in the case of non-disclosing firms? [source] Agency Relations within the Family Business System: an exploratory approachCORPORATE GOVERNANCE, Issue 3 2003L.A.A. Van den Berghe Researchers use various definitions to describe the family firm. The characteristics of family firms that are stressed in each of these definitions are somehow related to family control. All characteristics together reflect a spectrum of family firm types along one core dimension: family involvement in the firm. However, it is more helpful to distinguish among family firms by using their precise type. Each particular family firm type is characterised by a set of agency relations within and between the family system, ownership system and the business system. This paper is a first attempt to apply the insights from agency theory on a highly simplified (reference) family firm situation where the father is full owner and the daughter manager of the family firm. Agency theory establishes the foundation for the optimal contract conditions between father and daughter. While real life is often characterised by bounded rationality and incomplete information, future research should help identify the "optimal contract" be-tween the family/shareholders and management in various family firm types under these circumstances. [source] CEO Duality and Firm Performance during China's Institutional TransitionsMANAGEMENT AND ORGANIZATION REVIEW, Issue 2 2007Mike W. Peng abstract Does CEO duality , the practice of one person serving both as a firm's CEO and board chair , contribute to or inhibit firm performance? Agency theory suggests that CEO duality is bad for performance because it compromises the monitoring and control of the CEO. Stewardship theory, in contrast, argues that CEO duality may be good for performance due to the unity of command it presents. The empirical evidence, largely from developed economies, is largely inconclusive. This article joins the debate by extending empirical work to the largely unexplored context of institutional transitions. Our findings, based on an archival database covering 403 publicly listed firms and 1,202 company-years in China, offer stronger support for stewardship theory and relatively little support for agency theory. Finally, we also call for a contingency perspective to specify the nature of conditions such as resource scarcity and environmental dynamism under which CEO duality may be especially valuable. [source] A comparison of ownership structures and innovations of US and Japanese firmsMANAGERIAL AND DECISION ECONOMICS, Issue 1 2005Peggy M. Lee This study analyzes the impact of ownership structure on innovation in the US and Japan. Agency theory is used to develop links between the distinct patterns of ownership in the US and Japan to differences in innovation. Empirical evidence shows that ownership concentration and the identity of the investors with large ownership positions affects innovation. This relationship differs across the two countries. Copyright © 2005 John Wiley & Sons, Ltd. [source] Theory and Practice in the Design of Physician Payment IncentivesTHE MILBANK QUARTERLY, Issue 2 2001James C. Robinson Combining the economic literature on principal-agent relationships with examples of marketplace innovations allows analysis of the evolution of methods for paying physicians. Agency theory and the economic principles of performance-based compensation are applied in the context of imperfect information, risk aversion, multiple interrelated tasks, and team production efficiencies. Fee-for-service and capitation are flawed methods of motivating physicians to achieve specific goals. Payment innovations that blend elements of fee-for-service, capitation, and case rates can preserve the advantages and attenuate the disadvantages of each. These innovations include capitation with fee-for-service carve-outs, department budgets with individual fee-for-service or "contact" capitation, and case rates for defined episodes of illness. The context within which payment incentives are embedded, includes such nonprice mechanisms as screening and monitoring and such organizational relationships as employment and ownership. The analysis has implications for health services research and public policy with respect to physician payment incentives. [source] Residual Claims in Co-operatives: Design IssuesANNALS OF PUBLIC AND COOPERATIVE ECONOMICS, Issue 3 2003R. Srinivasan This paper examines issues in the design of a co-operative member's contractual relationship with the other agents (including the remaining members) using organizational economics. The paper assumes that the central defining characteristic of a co-op is the residual claim specification. Agency theory identifies certain inherent problems of the co-op form, the horizon problem, common property problem, and non-transferability. Non-transferability both reduces the incentive to monitor and imposes limits on portfolio diversification. This paper argues that features such as claim incompleteness and non-transferability are not inherent to the co-op but may be transaction-cost economizing. The paper also argues that the pre-emptive payoff feature by which the residual claimants (the co-op members) also become fixed payoff agents can affect the risk of other agents, and is an important determinant of co-op risk. A co-op may have more than one potential residual claim base. Five generic design choices are available for handling possible multiple claim bases: battleground, pre-specified allocation, limited return, alignment, and fixed payoff. The paper uses the design of residual claims in sugar co-ops to show how a co-op can partly overcome some of the problems identified by agency theory. This illustration ties together the issues of claim incompleteness and non-transferability, pre-emptive payoff, and multiple claim bases. [source] Outsourcing and Audit Risk for Internal Audit Services,CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2000DENNIS H. CAPLAN Abstract Some companies now outsource their internal audit function to public accountants. Internal auditors and accounting firms disagree about the merits of outsourcing. Each type of auditor claims to provide more cost-effective services and appears to claim superior expertise. This paper uses agency theory to examine outsourcing and reconciles the outsourcing debate without resorting to differential auditor expertise. Under the assumptions that public accountants' "deep pockets" provide incentives to outsource and their higher opportunity cost provides a disincentive, we characterize the optimal employment contract with each auditor. We find that public accountants provide higher levels of testing, but possibly for a higher expected fee. This result supports both the internal auditor's claim as the lower cost provider, and the public accountant's claim of higher quality. We also find that incentives to outsource generally increase in various measures of risk, including the risk that a control weakness exists and the size of the loss that can result from an undetected control weakness. [source] Financing Constraints, Ownership Control, and Cross-Border M&As: Evidence from Nine East Asian EconomiesCORPORATE GOVERNANCE, Issue 6 2009Yenn-Ru Chen ABSTRACT Manuscript Type: Empirical Research Question/Issue: This study distinguishes between the effects of financial constraint determinants on cross-border mergers and acquisitions (M&As) and domestic M&As for all takeover bids announced in nine East Asian economies from 1998 to 2005. Research Findings/Insights: The results of logistic regressions verify that the extent of stock market and governance developments improves corporate financing conditions and subsequently encourages cross-border M&As in East Asia. The results also indicate that, except for ownership control variables, the firm-specific factors of financing constraints reduce the occurrence of cross-border M&As relative to domestic M&As. Although family- and state-controlled firms have better access to external financing, they are reluctant to risk diluting their management control and thus prefer domestic M&As to cross-border deals. Theoretical/Academic Implications: This study enhances the empirical studies of the relation between financing constraints and corporate investments based on the market imperfection hypothesis of corporate finance theories. In addition, this study also addresses the interaction between the market imperfection hypothesis and agency theory in explaining the effects of special ownership control on cross-border M&As relative to domestic deals. Furthermore, by examining the research questions across nine East Asian economies, this study provides an understanding of how such a relation applies to firms in countries where information asymmetry is high. Practitioner/Policy Implications: The findings indicate the importance of corporate governance and verify the effects of unique organizational structures on major corporate decisions. Specifically, family-controlled firms are often free of the financing constraints inherent in investment decisions. Thus, it is necessary to consider such organizational uniqueness when explaining the financing behavior of cross-border M&As conducted by Asian firms. [source] Business Group Affiliation, Firm Governance, and Firm Performance: Evidence from China and IndiaCORPORATE GOVERNANCE, Issue 4 2009Deeksha A. Singh ABSTRACT Manuscript Type: Empirical Research Question/Issue: This study seeks to understand how business group affiliation, within firm governance and external governance environment affect firm performance in emerging economies. We examine two aspects of within firm governance , ownership concentration and board independence. Research Findings/Insights: Using archival data on the top 500 Indian and Chinese firms from multiple data sources for 2007, we found that group affiliated firms performed worse than unaffiliated firms, and the negative relationship was stronger in the case of Indian firms than for Chinese firms. We also found that ownership concentration had a positive effect on firm performance, while board independence had a negative effect on firm performance. Further, we found that group affiliation , firm performance relationship in a given country context was moderated by ownership concentration. Theoretical/Academic Implications: This study utilizes an integration of agency theory with an institutional perspective, providing a more comprehensive framework to analyze the CG problems, particularly in the emerging economy firms. Empirically, our findings support, as well as contradict, some of the conventional wisdom, and suggest useful avenues for future research. Practitioner/Policy Implications: This study shows that reforms in general and CG reforms in particular are effective in emerging economies, which is an encouraging sign for policy makers. However, our research also suggests that it may be time for India and China to stop the encouragement for the empire building through group formation in the corporate world. For practioners, our findings suggest that firms need to balance the need for oversight with the need for advice, while selecting independent directors. [source] Taking Stock of Corporate Governance Research While Looking to the FutureCORPORATE GOVERNANCE, Issue 3 2009Igor Filatotchev ABSTRACT Manuscript Type: Editorial Research Question/Issue: This essay identifies some key issues for the analysis of corporate governance based on the articles within this special review issue coupled with our own perspectives. Our aim in this issue is to distil some research streams in the field and identify opportunities for future research. Research Findings/Results: We summarize the eight papers included in this special issue and briefly highlight their main contributions to the literature which collectively deal with the role and impact of corporate boards, codes of corporate governance, and the globalization of corporate governance systems. In addition to the new insights offered by these reviews, we attempt to offer our own ideas on where future research needs to be targeted. Theoretical Implications: We highlight a number of research themes where future governance research may prove fruitful. This includes taking a more holistic approach to corporate governance issues and developing an inter-disciplinary perspective by building on agency theory while considering the rich new insights offered by complementary theories, such as behavioral theory, institutional theory and the resource-based views of the firm. In particular, future corporate governance research needs to be conducted in multiple countries, particularly in emerging economies, if we want to move closer to the journal's aim of producing a global theory of corporate governance. Practical Implications: Our analysis suggests that analytic and regulatory approaches to corporate governance issues should move from a "one-size-fits-all" template to taking into account organizational, institutional and national contexts. [source] Agency Relations within the Family Business System: an exploratory approachCORPORATE GOVERNANCE, Issue 3 2003L.A.A. Van den Berghe Researchers use various definitions to describe the family firm. The characteristics of family firms that are stressed in each of these definitions are somehow related to family control. All characteristics together reflect a spectrum of family firm types along one core dimension: family involvement in the firm. However, it is more helpful to distinguish among family firms by using their precise type. Each particular family firm type is characterised by a set of agency relations within and between the family system, ownership system and the business system. This paper is a first attempt to apply the insights from agency theory on a highly simplified (reference) family firm situation where the father is full owner and the daughter manager of the family firm. Agency theory establishes the foundation for the optimal contract conditions between father and daughter. While real life is often characterised by bounded rationality and incomplete information, future research should help identify the "optimal contract" be-tween the family/shareholders and management in various family firm types under these circumstances. [source] Channel Coordination for a Supply Chain with a Risk-Neutral Manufacturer and a Loss-Averse Retailer,DECISION SCIENCES, Issue 3 2007Charles X. Wang ABSTRACT This articles considers a decentralized supply chain in which a single manufacturer is selling a perishable product to a single retailer facing uncertain demand. It differs from traditional supply chain contract models in two ways. First, while traditional supply chain models are based on risk neutrality, this article takes the viewpoint of behavioral principal,agency theory and assumes the manufacturer is risk neutral and the retailer is loss averse. Second, while gain/loss (GL) sharing is common in practice, there is a lack of analysis of GL-sharing contracts in the supply chain contract literature. This article investigates the role of a GL-sharing provision for mitigating the loss-aversion effect, which drives down the retailer order quantity and total supply chain profit. We analyze contracts that include GL-sharing-and-buyback (GLB) credit provisions as well as the special cases of GL contracts and buyback contracts. Our analytical and numerical results lend insight into how a manufacturer can design a contract to improve total supply chain, manufacturer, and retailer performance. In particular, we show that there exists a special class of distribution-free GLB contracts that can coordinate the supply chain and arbitrarily allocate the expected supply chain profit between the manufacturer and retailer; in contrast with other contracts, the parameter values for contracts in this class do not depend on the probability distribution of market demand. This feature is meaningful in practice because (i) the probability distribution of demand faced by a retailer is typically unknown by the manufacturer and (ii) a manufacturer can offer the same contract to multiple noncompeting retailers that differ by demand distribution and still coordinate the supply chains. [source] An Agency Theory Perspective on Student Performance EvaluationDECISION SCIENCES JOURNAL OF INNOVATIVE EDUCATION, Issue 1 2005Michael E. Smith ABSTRACT The emphasis in recent research on the responsibility of college and university business instructors to prepare students for future employment underscores a need to refine the evaluation of student performance. In this article, an agency theory framework is used to understand the trade-offs that may be involved in the selection of various approaches to student evaluation. Understanding these trade-offs may be particularly important as faculty members seek to balance competing obligations, such as research and service requirements, while ensuring instructional effectiveness. This article presents propositions for examining how various institutional, instructor, and student characteristics influence the selection and use of student performance evaluation techniques (i.e., exams, papers, and group assignments). In conclusion, we suggest that agency theory may serve as a foundation for understanding current evaluation practices and guiding instructors in their selection of appropriate evaluation mechanisms. [source] Firm-Specific Human Capital and Governance in IPO Firms: Addressing Agency and Resource Dependence ConcernsENTREPRENEURSHIP THEORY AND PRACTICE, Issue 4 2009Jonathan D. Arthurs Entrepreneurs with firm-specific human capital represent both a potential source of competitive advantage and a threat to appropriate the rents that are ultimately generated by a new venture. This situation presents interesting agency and resource dependence challenges. While potential investors in these ventures will want assurances that their interests are protected, they will also want to ensure that these key entrepreneurs remain with the organization. Using agency theory and resource dependence theory, we examine the types of governance mechanisms that are implemented in firms going through an initial public offering comparing those ventures which indicate a dependence on these critical entrepreneurs versus those that do not. Our analysis reveals that ventures exhibiting dependence on key entrepreneurs are associated with higher insider and outsider ownership by the board, greater start-up experience by the board, greater use of contingent compensation, and greater use of involuntary departure agreements. [source] Toward a Theory of Social Venture FranchisingENTREPRENEURSHIP THEORY AND PRACTICE, Issue 5 2007Paul Tracey This article examines the relevance of the two main theories used to understand business format franchising,resource scarcity theory and agency theory,for social venture franchising through an in-depth case study of one of the United Kingdom's first and most high-profile social franchises. We posit that both theories can be reframed to take account of the distinctive characteristics of social franchise systems. In developing our arguments, we present four findings that, taken together, move us closer toward a theory of social venture franchising. [source] Why Do Some Family Businesses Out-Compete?ENTREPRENEURSHIP THEORY AND PRACTICE, Issue 6 2006Governance, Long-Term Orientations, Sustainable Capability This article seeks to link the domains of corporate governance, investment policies, competitive asymmetries, and sustainable capabilities. Conditions such as concentrated ownership, lengthy tenures, and profound business expertise give some family-controlled business (FCB) owners the discretion, incentive, knowledge, and ultimately, the resources to invest deeply in the future of the firm. These long-term investments accrue from particular governance conditions and engender competitive asymmetries,organizational qualities that are hard for other firms to copy, and thus, if tied to the value chain, create capabilities that are sustainable. Investments in staff and training, e.g., create tacit knowledge and preserve it within the firm. Investments in enduring relationships with partners enhance access to resources and free firms to focus on core competencies. And devotion to a compelling mission dedicates most of these investments to a core competency. When such investments are farsighted, orchestrated, and ongoing, capabilities will tend to evolve in a cumulative trajectory, making them doubly hard to imitate and thereby extending competitive advantage. Arguments are supported by making reference to the literature on corporate governance and agency theory and to emerging research on FCBs. [source] Shifting Imperatives: An Integrative View of Resource Scarcity and Agency Reasons for FranchisingENTREPRENEURSHIP THEORY AND PRACTICE, Issue 1 2006Gary J. Castrogiovanni Alternative explanations of franchising offer contrasting predictions as to how the proportion of franchised outlets changes as franchisors age. We propose that two dominant views,resource-scarcity and agency theory,can be integrated by delineating when each is most relevant. Data from 102 franchisors over a 21-year period suggest that resource-scarcity considerations take precedence when franchisors are young, but that agency considerations prevail as franchisors age. Thus, the proportion franchised exhibits a cubic pattern as franchisors age,increasing rapidly at first, decreasing, and then increasing again. Future researchers and practitioners alike can benefit from understanding how the relative influences of resource and agency considerations shift over time. [source] Trends and Directions in the Development of a Strategic Management Theory of the Family FirmENTREPRENEURSHIP THEORY AND PRACTICE, Issue 5 2005James J. Chrisman This article provides a review of important trends in the strategic management approach to studying family firms: convergence in definitions, accumulating evidence that family involvement may affect performance, and the emergence of agency theory and the resource-based view of the firm as the leading theoretical perspectives. We conclude by discussing directions for future research and other promising approaches to inform the inquiry concerning family business. [source] Democratic Accountability and National Parliaments: Redefining the Impact of Parliamentary Scrutiny in EU AffairsEUROPEAN LAW JOURNAL, Issue 4 2007Katrin Auel Such an evaluation, however, is flawed: Formal mandating rights are usually incompatible with the overall logic of parliamentary systems, which explains why most national parliaments make very little use of them. Even more importantly, it unduly reduces parliamentary functions to the legislative or policy-making function. Drawing on agency theory, it will instead be argued that the functions of public deliberation and of holding the government publicly to account are at least as important and therefore need to be included in a redefined concept of parliamentary strength. In particular, the article proposes a distinction between two different elements of accountability,monitoring and political scrutiny,which recognises parliamentary majority and opposition as two distinct agents of the electorate. [source] Knowledge transfer in project reviews: the effect of self-justification bias and moral hazardACCOUNTING & FINANCE, Issue 1 2009Mandy M. Cheng M40 Abstract In this study, we examine two factors that impact managers' willingness to share private information during the project review stage of capital budgeting. Drawing on the cognitive dissonance theory and the agency theory, we find that both high perceived personal responsibility and the use of project reviews for performance evaluation result in a greater tendency for managers to withhold negative private information. However, we do not find an interaction between these two factors. Our study makes a contribution to both the academic literature investigating factors affecting project reviews and the practitioner literature looking at design and implementation of effective project reviews. [source] Value of Multinationality: Internalization, Managerial Self-interest, and Managerial CompensationJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 1-2 2002Kenneth K. Yung In this paper, we examine the impact of managerial self-interest on the value of multinationality. Since agency theory also suggests that a divergence between the interests of managers and shareholders can be aligned by effective managerial incentive, we also examine the effect of managerial compensation on the value of multinationality. Our results show that for high- Q (Tobin's Q > 1) firms, investors do not associate the spending of free cash flow on multinationality with the problem of overinvestments. For high- Q firms, it is also found that the value of multinationality can be enhanced by effective managerial incentives. For low- Q firms (Tobin's Q < 1), it is found that the concern of managerial self-interest overwhelms the benefits of internalization, making multinationality a value-decreasing event. For low- Q firms, managerial compensation is also ineffective in promoting value-enhancing foreign direct investments. [source] PRIVATIZATION AND EFFICIENCY: FROM PRINCIPALS AND AGENTS TO POLITICAL ECONOMYJOURNAL OF ECONOMIC SURVEYS, Issue 4 2008Alberto Cavaliere Abstract We survey the theoretical literature on privatization and efficiency by tracing its evolution from the applications of agency theory to recent contributions in the field of political economy. The former extend the theory of regulation with incomplete information to address privatization issues, comparing state-owned enterprises with private regulated firms. The benefits of privatization may derive either from the constraints it places on malevolent agents or from the impossibility of commitment by a benevolent government because of incomplete contracts. Contributions dealing with political economy issues separate privatization from restructuring decisions. They either explore bargaining between managers and politicians or analyse the impact of privatization shaped by political preferences on efficiency. The theoretical results regarding the relation between privatization and efficiency do not lead to any definitive conclusion. Privatization may increase productive efficiency when restructuring takes place whereas its effects on allocative efficiency still remain uncertain. [source] The Economics of Voluntary Traceability in Multi-Ingredient Food ChainsAGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 1 2010Diogo M. Souza-Monteiro The consumption of multi-ingredient foods is increasing across the globe. Traceability can be used as a tool to gather information about and manage food safety risks associated with these types of products. The authors investigate the choice of voluntary traceability in three-tiered multi-ingredient food supply chains. They propose a framework based on vertical control and agency theory to model three dimensions of traceability systems: depth, breadth, and precision. Their analysis has three main results. First, full traceability is feasible as long as there are net benefits to a downstream firm that demands traceability across all ingredients. Second, horizontal network externalities are positive because an increase in the level of traceability in one ingredient requires a similar increase in others. Finally, vertical network effects will be positive insofar as willingness to pay and probabilities of food safety hazards increase. [EconLit Classification: Q130, L140]. © 2010 Wiley Periodicals, Inc. [source] Strategy Research in Emerging Economies: Challenging the Conventional Wisdom*JOURNAL OF MANAGEMENT STUDIES, Issue 1 2005Mike Wright ABSTRACT This review and introduction to the Special Issue on ,Strategy Research in Emerging Economies' considers the nature of theoretical contributions thus far on strategy in emerging economies. We classify the research through four strategic options: (1) firms from developed economies entering emerging economies; (2) domestic firms competing within emerging economies; (3) firms from emerging economies entering other emerging economies; and (4) firms from emerging economies entering developed economies. Among the four perspectives examined (institutional theory, transaction cost theory, resource-based theory, and agency theory), the most dominant seems to be institutional theory. Most existing studies that make a contribution blend institutional theory with one of the other three perspectives, including seven out of the eight papers included in this Special Issue. We suggest a future research agenda based around the four strategies and four theoretical perspectives. Given the relative emphasis of research so far on the first and second strategic options, we believe that there is growing scope for research that addresses the third and fourth. [source] Boards of Directors and Shark Repellents:Assessing the Value of an Agency Theory PerspectiveJOURNAL OF MANAGEMENT STUDIES, Issue 3 2000Steven A. Frankforter Because shark repellents decrease the vulnerability of firms (and their incumbent managers) to the market for corporate control, the decision to adopt these devices represents an excellent test of agency theory. In this empirical study, we examined the relationships between the adoption of shark repellents and several mechanisms that, according to agency theory, should align the interests of corporate board members and shareholders and/or make directors more effective monitors of management behaviour. Of the variables included, only board stock ownership (especially by employee directors) was linked to a reduced propensity to adopt shark repellents in the predicted manner. Two variables not immediately as- sociated with agency theory , the proportion of inside directors appointed by the incumbent chief executive officer (CEO) and a lower ratio of CEO compensation to the compensation of other top executives , were linked to higher rates of shark repellent adoption. Given that agency theory explains relatively little of the variance in shark repellent adoption, we advocate serious consideration of other theoretical formulations for corporate governance, including two approaches , stewardship theory and agent morality , that take the moral (,other regarding') obligations of directors seriously. [source] Resource Scarcity and Agency Theory Predictions Concerning the Continued Use of Franchising in Multi-outlet NetworksJOURNAL OF SMALL BUSINESS MANAGEMENT, Issue 1 2006Gary J. Castrogiovanni A study of 439 franchisors was conducted to identify factors influencing changes in their propensity to franchise. Consistent with agency theory, franchisors with wide multinational scope were increasing their proportion of franchised outlets whereas franchisors with large outlets were emphasizing firm ownership. As predicted by resource scarcity theory, franchisors were decreasing their proportion franchised as they grew in size, although most of the decrease occurred while firms were relatively small. In contrast to resource scarcity theory, franchisors increased their proportion franchised over time. Key implications are that both agency and resource scarcity theories are needed to explain franchising, but perhaps future research should look beyond resource scarcities toward resource-based capabilities to better explain franchising decisions. [source] An Agency Theory Investigation of Supply Risk M anagementJOURNAL OF SUPPLY CHAIN MANAGEMENT, Issue 3 2003George A. Zsidisin SUMMARY Managing supply risk is an essential element of the overall supply management task. As the complexity of risk management has increased, responsiveness seems dominated by varying the level of inventory and using multiple supply sources as means of creating buffers. This research uses the framework of agency theory in managing supplier behaviors as a means to reduce supply risk and the impact of detrimental events. Empirical results indicate that purchasing organizations address various sources of supply risk by implementing management techniques that reduce the likelihood that detrimental events will occur. Firm size, purchases as a percentage of sales, and industry characteristics were also found to influence the manner in which supplier behaviors are managed. [source] CEO Duality and Firm Performance during China's Institutional TransitionsMANAGEMENT AND ORGANIZATION REVIEW, Issue 2 2007Mike W. Peng abstract Does CEO duality , the practice of one person serving both as a firm's CEO and board chair , contribute to or inhibit firm performance? Agency theory suggests that CEO duality is bad for performance because it compromises the monitoring and control of the CEO. Stewardship theory, in contrast, argues that CEO duality may be good for performance due to the unity of command it presents. The empirical evidence, largely from developed economies, is largely inconclusive. This article joins the debate by extending empirical work to the largely unexplored context of institutional transitions. Our findings, based on an archival database covering 403 publicly listed firms and 1,202 company-years in China, offer stronger support for stewardship theory and relatively little support for agency theory. Finally, we also call for a contingency perspective to specify the nature of conditions such as resource scarcity and environmental dynamism under which CEO duality may be especially valuable. [source] A transaction cost perspective on why, how, and when cash impacts firm performanceMANAGERIAL AND DECISION ECONOMICS, Issue 7 2009Jonathan P. O'Brien While both financial and behavioral theories suggest that cash holdings may be beneficial to R&D-intensive firms, agency theory would suggest that strong monitoring may be needed to ensure that cash holdings are not squandered. We contend that transaction cost economics provides a valuable lens for understanding the performance implications of cash holdings because not only does it explicate the benefits and costs of cash holdings in a single unified theoretical framework, but it further clarifies how environmental uncertainty critically moderates these relationships. Empirical tests on a large sample of US corporations yield strong support for our theory. Copyright © 2009 John Wiley & Sons, Ltd. [source] | ||||||||||||||||||||||||||||||||||