A REVIEW OF THE THEORITICAL FRAME WORK OF CORPORATE GOVERNANCE: AGENCY VERSUS TRANSACTION COST THEOR

A REVIEW OF THE THEORITICAL FRAME WORK OF CORPORATE GOVERNANCE: AGENCY VERSUS TRANSACTION COST THEOR

Author by Dr. Veronica Ekundayo

Language: English

Abstract

This paper reviews the theoretical framework of Corporate Governance with particular reference to Agency and Transaction Cost Theory and in the process, recognizes that this twain theories not only connect at several intersections, but are also viable tools or models for sustaining a firm's growth. These new look or approach to Corporate Governance where fully appreciated and efficiently implemented by business enterprises, will not only enhance a mutually beneficial action platform or environment for increased interaction, but in the long run, bridge the dichotomy and deadlock that usually exist between shareholders and management, thereby giving the latter a sense of belonging. While inevitability of conflicts in an organization are prescribed under the Agency and Cost of Transaction Theories as owing to the in-sensibilities displayed by owners of business, the paper argues that a business enterprise can actually re-position itself in such a way as to minimize such conflicts without necessarily having to eradicate them completely. Consequently, this study seeks to dispel such fears by justifying that cost or risk reduction are some of the answers to the hue and cries of firms in crisis and indeed to the enormous challenges confronted by businesses. The study is historical by nature and uses inter¬disciplinary methodology to advance the argument.


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