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Seminar_18_AgencyTheory

Financial Accounting Theory (5th Edition)

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Matt Steger Seminar 18 – Agency Theory October 27, 2009 Today’s seminar features an article published by Fama and Jensen who discuss how the types of residual claims can help us in “distinguishing organizations from one another and in explaining the survival of specific organizational form in specific activities” (Fama & Jensen, 345). This is important because of the implications that each type of residual claim has on issues surrounding the notion of agency. Also part of our reading, was the remainder of Scott’s chapter on An Analysis of Conflict where we find his continued discussion of the principle-agent theory, a set of rudimentary demonstrations illustrating the possibilities that the theory carries, and an interesting presentation on the trade-offs between sensitivity and precision that are required by the introduction of extra parameters to the agency model. The heart of Fama and Jensen’s article, Agency Problems and Residual Claims , is the insights garnered from the varying types of residual claims that are demonstrated within different entity
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