Agent Theory and Its Impact on Economic Crisis

Ion Stegaroiu (), Robert-Ionut Dobre () and Dorin Iancu ()
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Ion Stegaroiu: University Of Valahia Târgoviºte
Robert-Ionut Dobre: University Of Valahia Târgoviºte
Dorin Iancu: University Of Valahia Târgoviºte

Ovidius University Annals, Economic Sciences Series, 2012, vol. XII, issue 1, 1182-1186

Abstract: This article wants to design a liaison between the world economic crisis and agency theory, trying to determine if the current crisis is a consequence of the common corporate governance practices. More specifically, it indicates that these practices lead to excessive risk taking, like subprime mortgage securities, because they have no penalty for the manager, or don’t damage his wealth in the case of collapse. Simultaneously, golden parachutes and other exit packages incite termination of the employment agreement since they reward failure, and provide little incentive for the executives to perform properly.

Keywords: Agent theory; principal; agent; incentives; financial crisis (search for similar items in EconPapers)
JEL-codes: M29 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:xii:y:2012:i:12:p:1182-1186

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