Research on the Influence Mechanism of the Agency Problem on Financial Stability from the Perspective of Economics and Sociology

Abstract

The competence of the national economy depends on the reliability of the financial system, which is an inevitable mechanism utilized in developed market economies. This provides the reasoning, however, that agency problems in the financial system, because of information asymmetries and conflicts of interest, are the root of most financial crises. This paper aims to find out how the delegation problem arises and what financial stability loss in a market economy is from the viewpoint of economics and sociology. This article on inter-relations, influencing components, and the basis of economic agents' delegation debt to the systems stability is analyzed. Additionally, this article provides for the influence of the agency problems and the financial system stability, including the reasons and implications, as well as how we improve the efficiency and strength of the financial system and optimize corporate governance simultaneously. This research paper integrates economic and sociological schools of thought to examine the agency dilemma in the financial system and the implications of this problem for financial stability. Since the study explains how agency problems affect decision-making, it aims to make the economic system more effective and sustainable.