On Principal-agent Theory

Abstract

The principal-agent theory is a vital part of the enterprise theory, and principal-agent problem is also a hit in the reform of state-owned enterprises. The core of the theory is to reduce the agency cost caused by two factors:asymmetric information and interests conflict between principals and agents. For reducing agency cost,there are two different approaches: Empirical agent theory and Principal-agent theory. Both theories have their different characteristics and effects.