sample 2 - AGENCY THEORY Agency theory is a set up in...

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AGENCY THEORYAgency theory is a set up in business organizations that try to explain the relationship that exists amongst the various influential owners in a business organization. In an organization, thereexist the various personnel in various managerial positions that are served with the responsibility of managing various departments of the organization. In the course of their daily duties, their roles become interrelated and sometimes there might come up conflicts or misunderstanding among the various personnel in the organization. Thus, the agency theory seeks to establish a suitable code of conduct amongst the various parties involved in management.There are various stake holders in an organization that the agency theory tries to establish a code of professional relationship amongst. They include:1. Stockholders.2. Managers3. Auditors4. Other agents in relation to the organization.In an organization, the shareholders in it hire managers to run the entire organization on their

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