Agency Relationship Research Articles

A note on optimal contracting with public ex post information under limited liability

Riordan and Sappington (J Econ Theory 45:189–199, 1988) show that in an agency relationship in which the agent’s type is correlated with a public ex post signal, the principal may attain first best (full surplus extraction and efficient output levels) if the agent is faced with a lottery such that each type is rewarded for one signal realization and punished equally for all the others. Gary-Bobo and Spiegel (RAND J Econ 37:431–448, 2006) show that there exist locally incentive compatible lotteries such that limited liability constraints are satisfied, only if these constraints are satisfied when that kind of lottery is used. We explore how lotteries should be designed to attain not only local but also global incentive compatibility when the agent is protected by limited liability. The main issue with global incentive compatibility rests with intermediate types being potentially attractive reports to both lower and higher types. A lottery including three levels of profit (rather than only two) is found to be optimal under limited liability, in that it is most likely to be globally incentive compatible, if local incentive constraints are strictly satisfied. Conditions for first-best implementation are identified.

Blockchain Solutions for Agency Problems in Corporate Governance

As a foundational technology, blockchain technology creates the infrastructure for decentralized networked governance that, over time, creates the environment that enables the removal of internal and external monitoring mechanisms previously necessitated by agency problems in corporate governance. Blockchain technology facilitates a substantial increase in efficiency in the agency relationship and lowers agency costs in orders of magnitude.

Constitutive characters: the “Great I Am” is actually “We Are”

ABSTRACTThis paper argues for a new theoretical construct, the “constitutive character,” a powerful rhetorical persona that discursively stakes out a group’s ontology, epistemology, and axiology. Aligned with James Boyd White’s theory of constitutive rhetoric and expanding on the literature of personas, as described by Edwin Black, this construct emphasizes rhetorical agency and discursive relationship. This paper reveals how Red Letter Christians, a contemporary evangelical organization, constitute a nuanced ideological identity by constructing a very particular version of Jesus that interacts with and influences the social world.

A comparison of professional and private time preferences of General Practitioners

In a perfect agency relationship, doctors consider all information and select the patient's ‘utility maximising’ option given the patient's preferences. The patient's time preferences are important as treatments vary in the timing and length of their benefits. However, doctors often do not have full information on patients' preferences and may apply their own preferences. This has generated empirical interest in estimating doctors' time preferences. However, these studies generally elicit doctors' private preferences (preferences for their own health) rather than professional preferences (preferences for the patient). We hypothesise that private and professional preferences may differ. Professional time preferences may be ‘taught’ in medical school or learned through repeated interactions with patients. If preferences differ then estimates of doctors' private preferences are less informative for medical decision-making. This study compares private and professional time preferences for health in a national sample of General Practitioners, using a between sample design. Time discounting is explored using exponential and quasi-hyperbolic models. We elicit time preferences using multiple price lists. We find no significant difference between the time preference for the self or the patient. This result holds for axiomatic discounting classification and maximum likelihood estimates. We do not find evidence of present-bias. There are a high proportion of increasingly impatient GPs, potentially implying a maximum ‘willingness to wait’ for treatment benefits. GPs value the health state differently between themselves or for a patient. These results suggest that we can use estimates of private preferences from doctors to inform medical decision-making.

Cutting Class Action Agency Costs: Lessons from the Public Company

The agency relationship between class counsel and class members in Rule 23(b)(3) class actions is similar to that between executives and shareholders in U.S. public companies. This similarity has often been noted in class action literature, but until this Article no attempt has been made to systematically compare the approaches taken in these two settings to reduce agency costs. Class action scholars have downplayed the importance of the public company analogy because public companies are subject to market discipline and class actions are not. But this is precisely why the analogy is useful: because public companies are subject to market discipline, the tools they utilize to reduce agency costs are more likely to be efficient. This Article looks to those tools as inspiration for class action reform, proposing several novel ways to improve current practice.

Venta de cosa ajena y venta celebrada por mandatario sin poder

An agent acting without authority because he never was an agent, or acting beyond the authority granted by the principal, or due to the termination of the agency, or because the agency relationship is null and void, produces several problems. In this work we will analyze the relationship between an agent acting without authority with the statutory rule of article 1,815 of the Civil Code, that states the validity of the sales by the non-owner, without prejudice of the rights of the truly owner.

Capital structure, corporate governance, and the effect of Sarbanes-Oxley

The Sarbanes-Oxley Act represented a major legislative action designed to increase transparency and accountability in U.S. corporations. Within the context of agency theory and corporate governance, the expectation is that the enactment of Sarbanes-Oxley impacted the agency relationship of firms and hence affected the corporate governance structure. With these changes, the question arises as to the capital structure decisions of corporations which have previously been shown to be related to agency measures and corporate governance. It is the objective of this research to examine the capital structure of U.S. firms as they relate to corporate governance measures and to determine the effect, if any, of Sarbanes-Oxley.

Establishing Appropriate Agency Relationships for Providers in China.

Physicians play multiple roles in a health system. They typically serve simultaneously as the agent for patients, for insurers, for their own medical practices, and for the hospital facilities where they practice. Theoretical and empirical results have demonstrated that financial relations among these different stakeholders can affect clinical outcomes as well as the efficiency and quality of care. What are the physicians’ roles as the agents of Chinese patients? The marketization approach of China’s economic reforms since 1978 has made hospitals and physicians profit-driven. Such profit-driven behavior and the financial tie between hospitals and physicians have in turn made physicians more the agents of hospitals rather than of their patients. While this commentary acknowledges physicians’ ethics and their dedication to their patients, it argues that the current physician agency relation in China has created barriers to achieving some of the central goals of current provider-side health care reform efforts. In addition to eliminating existing perverse financial incentives for both hospitals and physicians, the need for which is already agreed upon by numerous scholars, we argue that the success of the ongoing Chinese public hospital reform and of overall health care reform also relies on establishing appropriate physician-hospital agency relations. This commentary proposes 2 essential steps to establish such physician-hospital agency relations: (1) minimize financial ties between senior physicians and tertiary-level public hospitals by establishing a separate reimbursement system for senior physicians, and (2) establishing a comprehensive physician professionalism system underwritten by the Chinese government, professional physician associations, and major health care facilities as well as by physician leadership representatives. Neither of these suggestions is addressed adequately in current health care reform activities.

Design of firm‐specific training in an agency relationship: Who should take the initiative?

This paper considers the twofold problem of compensation contracting and the design of a human capital investment scheme. Before contracting, the principal and the agent can engage in a joint stochastic production process of exerting effort to raise the agent's productivity in the firm. The principal can employ synchronous effort exertion, or either actor can assume a leadership role. We determine which organizational design is best for the principal at the endogenously optimal compensation contract, depending on how the efforts interact.

Committing to School Development

School leaders are faced with an unprecedented growth in school data accompanied by expectations that they use this data to improve their institutions. Current technologies enable complex processes of unifying and analysing data in personalised and accessible formats. This study investigates a tool developed by the Norwegian Directorate for Education and Training called the Point of View analysis (PoV). The PoV combines outcome-based data on achievement, data from staff surveys about current practices, and the staff’s reflections. A central tenet in Actor-Network Theory (ANT) is that material tools do not just regulate the activities of humans, but have their own agency and form relationships with their human counterparts. This analysis positions the PoV as an actor that may transform, distort, or modify meaning or elements. A content analysis of the PoV instrument is conducted, and interviews with three school principals who have used the tool are analysed. An ANT-inspired analytical approach is used to demonstrate how the PoV tool connects local practices with national policies and discourses in emerging and fluctuating networks. This analysis revealed that powerful policy discourses may be compromised by their entanglement with local and regional concerns.

Teaching development leaders’ characteristics and experiences of success in research-focused universities: narratives of constraint and growth

ABSTRACTThe purpose of this study was to extend an understanding of success experienced by leaders in teaching development units. Using a framework comprised of narratives of constraint, this qualitative study interviewed 38 academics in leadership roles from Finland, Australia, Sweden, Norway, the United States, Canada, Scotland, and England. Findings revealed three groups of leaders as follows. (1) Unit leaders with narratives of constraint experience tensions with senior academic administration, low expectations and influence, an immovable structure, and low perceived institutional value for teaching. They also experience a subjugated culture, striving towards being respected within their institutions. (2) Unit leaders with narratives of constrained growth work with the willing and are eager to work with those who support teaching initiatives. They describe their experiences of securing their units through teaching quality rhetoric and committee work. (3) Unit leaders with narratives of growth experience a supportive culture, describing themselves as proactive in their unit’s successes with positive professional relationships. These unit leaders also experience a sense of agency, passion about their roles, persistence in achieving their vision, and focused on persuading colleagues that teaching is important. Teaching development unit leaders that experience success have a strong sense of agency and positive relationships.

Beyond the personal–anonymous divide: agency relations in powers of attorney in France in the eighteenth and nineteenth centuries

AbstractPowers of attorney are often interpreted as evidence of trust among the parties involved. We build a novel dataset of notarized powers of attorney, capturing a wide variety of agency relationships in four large French commercial cities in the eighteenth and nineteenth centuries, to test hypotheses on the relational basis of economic relationships. We find little support for the idea of a radical shift from personal to anonymous relationships during our period. Our results point to more nuanced transformations. The preference for proxies in the same occupation as the principal somewhat declined, while professional proxies emerged and principals used relational chains, especially involving notaries, to find proxies.

The Agency Problem Underlying Repression

State repression is a common tool used by autocrats, and to understand how the implementation of repression unfolds, I develop a theory with two key features. First, uncertainty resulting from political instability creates an important agency problem between a leader and members of the repressive apparatus. As a consequence of this agency problem, leaders must compensate the repressive apparatus for conducting repression, thus affecting leaders’ net benefit of retaining power. Second, political instability and the use of repression comprise an endogenous process that depends on a coordination dynamic between civilians. I show that the agency relationship I highlight implies that political institutions designed to alleviate problems associated with political instability can actually lead to higher levels of repression. Finally, I establish that leaders wanting to implement repression prefer to target civilians who are concentrated (geographically, economically, or socially) and that the relationship with the capacity to resist is more nuanced due to novel selection effects.

Agency costs in public transport systems: Net-cost contracting between the transport authority and private operators - impact on passengers

Drawing on an agency theory approach, this paper examines conflict of interests and the resulting agency costs in the provision of urban public transport services in Istanbul's public transport system, particularly the private bus and minibus operators' relationship with local government. The agency problem in Istanbul's urban mobility system shows itself most explicitly in private bus and minibus operators because of the net-cost (NC) contract model in place. The private bus and minibus operators' relationship with local government is examined as a case study of agency relationships. Conceptually, government transport authorities and transport operators, together with the passengers, are the main actors of this urban public transport system. They all have distinct needs, interests and requirements and interact with each other, all embedded in a specific institutional environment. Service quality provided by public transport operators depends on the positive interactions between these actors. Whereas passengers demand reliable, affordable, safe and comfortable mobility services, private bus and minibus operators aim to increase their revenue and maximise their profits. In contrast to this, government bus operators provide in-house bus services without much concern for profitability. Regulators or local authorities, on the other hand, are expected to set up an institutional environment where passengers' and operators' expectations are met in a satisfactory manner. Empirical analyses and interviews with key agents demonstrate that agency costs are shown to be the result of misaligned interests between the government transport authority and private operators that lead to reduced service quality in terms of safety, comfort, reliability and affordability. We conclude that the agency costs of current NC contracting on passengers in Istanbul has deficiencies and propose instead a performance-based gross-cost (PrGC) contracting model. PrGC contracting can alleviate agency costs by changing the incentives of operators where regulatory and financing mechanisms are not enough to handle NC contracting. Istanbul represents some transferable lessons and implications, especially for developing cities around the world.

HUBUNGAN KEAGENAN PEMERINTAHAN DAERAH DALAM KONTEKS ANGGARAN: SEBUAH AGENDA REKONSTRUKSI

The objectives of this study seem to analyze the agency relationship between executive and legislative in Jembrana local government in budgeting context during the three periods (e.g. new era, reform era, and euphoria reform era), and adat local village in Bali. This study also analyzes the instrument used by the adat local village in reducing conflict of interest and agency loss. Based on the information in adat Bali local village, the study aims at constructing a concept of agency to accommodate the agency relationship in the local government which is suitable for its organization. The method to approach to the study considers the Derrida Model to emphasize the wisdom of local culture values, or also the other isolated models. The paradigm accepts, compares, or synergizes all thoughts, and therefore, neither of definitions, texts nor ideologies appears established. All of these grow like the flowing water to follow the batch or the event flow in the field. It means that the character of the approach does not have absolute structure, form, and formality. The study, hence, utilizes ethnography as a strategy to explore and to map the local value wisdom. The conclusions of this study are: capitalism will be the artificial field where the market must replace the life. The breathing human community becomes merely an object, not subject. The study, then, looks for other alternative outside this consideration by promoting the local wisdom. Such effort really contributes to the construction of yadnya (sincere, balanced) agency relationship pattern and of compensation forms, like olihan-olihan, in which the citizen determines the proportion accepted by the agent.

The world(s) we live in – Inter-agency collaboration in forest management

Academics and politicians alike have argued for greater inter-agency collaboration to address sector-crossing policy issues, such as health care, policing, or natural resource management. Nevertheless, in reality, it remains a rare occurrence. We examine local-level (street-level) collaboration in the context of public forest management in Germany where, historically, public forests were solely under the forest management agency's authority. With the establishment of a nature conservation agency and subsequent legislative changes, responsibilities and authorities were increasingly distributed among both agencies. Today, the two agencies are connected through a system of approval procedures and expected to collaborate to further nature conservation objectives. We aim to understand how the mandate to collaborate is put into practice, and find a diversity of local level agency relationships. While the literature suggests the benefits of inter-agency collaboration stems from including a diversity of disciplines and compensating for limited resources, we find these aspects to pose significant challenges in local level practices. Aside from actor-related factors, we also found systemic and societal actors to be a strong influence on inter-agency exchange.

Lying through others: Does delegation promote deception?

How do agency relationships affect an individual’s willingness to lie for monetary advantage? Does lie aversion decline if a lie (or truth) is sent through an agent, rather than sent directly by the individual? In a recent paper, Erat (2013) shows that a significant proportion of his subjects prefer to delegate a deception decision. We present experiments designed to focus on one of several possible explanations for this intriguing behavior – that delegation reduces lie aversion. The experiments reveal that subjects are more willing to lie through a delegate than to lie directly despite controlling for potential effects of delegated decision-making on preferences over payoffs, probabilities of actions, and/or the desire to avoid taking a decision.

Accounting Scandals: Beyond Corporate Governance

Accounting scandals are becoming perpetual in nature. They range from the ancient Mesopotamia, to the South Sea Bubble of 1720, to the famous Enron of 2001, down to Parmalat, Tesco and Toshiba of today. The series of accounting scandals that have occurred in the last two decades calls for a greater concern by the accounting profession. The accounting scandals that have occurred in this 21st century alone have shown that there is a need to look beyond corporate governance in the fight against financial deception. In this paper we argue that even in the face of the Sarbanes Oxley Act of 2002 and other regulations around the world that are targeted towards effective corporate governance, accounting scandals have never ceased to occur. Most of the legislation that has been passed in recent times was targeted at corporate governance, forgetting the crucial role that audit play within the agency relationship. And whenever there is any revelation of fraudulent financial reporting, investors don’t ask who are the directors, but the first question they ask is who are the auditors? Hence, there is a need to improve audit quality by approaching it from a forensic accounting perspective in order, to reduce the incidence of financial statement frauds in this era of information revolution. Thus, restoring investors’ confidence back in the financial reporting process and corporate governance. In this paper, we propose a forensic accounting paradigm as a viable option for reducing accounting scandals, since this will compliment corporate governance systems.

Accounting Scandals: Beyond Corporate Governance

Accounting scandals are becoming perpetual in nature. They range from the ancient Mesopotamia, to the South Sea Bubble of 1720, to the famous Enron of 2001, down to Parmalat, Tesco, and Toshiba of today. The series of accounting scandals that have occurred in the last two decades calls for a greater concern by the accounting profession. The accounting scandals that have occurred in this 21st century alone have shown that there is a need to look beyond corporate governance in the fight against financial deception. In this paper, we argue that even in the face of the Sarbanes-Oxley Act (SOA) of 2002 and other regulations around the world that are targeted towards effective corporate governance, accounting scandals have never ceased to occur. Most of the legislations that have been passed in recent times were targeted at corporate governance, forgetting the crucial role that audit plays within the agency relationship. And whenever there is any revelation of fraudulent financial reporting, investors do not ask who are the directors, but the first question they ask is who are the auditors? Hence, there is a need to improve audit quality by approaching it from a forensic accounting perspective in order to reduce the incidence of financial statement frauds in this era of information revolution, thus restoring investors’ confidence back in the financial reporting process and corporate governance. In this paper, we propose a forensic accounting paradigm as a viable option for reducing accounting scandals, since this will compliment corporate governance systems.

Supply Chain Expedience: Unraveling the Double Helix of Delivery Delays

We build on a metaphor where supply chain delivery delays result from the intertwined double helix of motor carrier errors and driver errors. Agency theory provides a foundation for understanding the relationship between a shipping company, a motor carrier and a truck driver, in cargo transportation in a supply chain. However, agency theory’s moral hazard construct is insufficient for fully explaining delays in this context. We integrate the literature on organizational expedience with agency theory to develop an explanation for actions by an agent that knowingly breaks rules in order to support both its own interests and the principal’s goals, further speculating that the principal may turn a blind eye to such actions. The cognitive science literature is then used to develop an understanding of motor carrier errors and truck driver errors, to develop hypotheses based on expedience as a way of compensating for motor carrier and truck driver errors. Logit analysis and survival analysis, using a Cox proportional hazards model and ROC curve, are used to analyze an archival data set of over 200,000 recent supply chain deliveries at a Fortune 500 company, which we linked to data about motor carrier behavior and truck driver behavior in a U.S. Department of Transportation (DOT) database. The results are relevant to shipping companies that rely on large trucks to transport their cargo, motor carriers providing transportation services and academics seeking to understand the nuances of agency relationships in supply chains and interested in incorporating archival data into their research.