User:SoloEternal/Agency cost

A concentrated shareholder structure can result in small groups that hold a significant proportion of the company’s shares. These shareholders can exercise significant control over the company as well as cause conflicts of interest between concentrated and other shareholders. For instance, concentrated shareholders may prioritise their profits and rights over those of other shareholders, thus increasing agency costs. For example, concentrated shareholders can make decisions that are more beneficial to themselves, such as higher dividend payouts or short-term, high-repayment business decisions. Such decisions may adversely affect the rights of other shareholders or the long-term survival of the company.

In 2014, the study “Yesterday’s Heroes: Compensation and Creative Risk-Taking,” was published in the Journal of Finance. The authors explained how executive compensation could increase the rate of creative risk-taking, which can lead to better company performance but, at the same time, increase agency costs. The authors used data from the movie industry to illustrate that managers with past successes are more likely to take creative risks and try to bring higher profit returns with higher risks, such as investing in projects with a low probability of success, which can increase agency costs. The paper summarised that the design of executive compensation should consider the potential of creative risk-taking and agency costs. Moreover, boards should carefully monitor the activities of managers to ensure that they are acting to achieve the best profit returns for shareholders.

The article “Large shareholders and corporate control” was published in the Journal of Political Economy in 1985. The paper provides a theoretical framework that illustrates the role of large shareholders in corporate governance and control. For instance, large shareholders can be crucial in solving agency problems between managers and other shareholders. In addition, they can monitor managers and intervene when necessary in order to protect their profits. Large shareholders can also play an essential role in corporate control. For example, large shareholders hold a significant stake in the company and can therefore influence critical decisions, such as the election of directors and the adoption of significant corporate policies. These decisions could increase the agency cost because large shareholders may decide to get maximum profit for themselves, which is not usually the best decision for the company's long-term survival.

Labour agency costs refer to the costs arising when there is a conflict of interest between employers and employees. These conflicts can be caused by employees who may act to maximise their own interests rather than those of their employers, thus causing a loss of value for the employer. The agency cost could increase if the abilities of the employees do not match their job requirements, which reduces productivity and increases costs for their employers. As a result, many employers are implementing various human resource management strategies to reduce these agency costs. For example, they design fair and transparent compensation and incentive schemes, provide training and career development opportunities, and establish clear communication channels between employees and management. The ultimate goal is to create a more engaged and motivated workforce to reduce potential labour agency costs. In 1995, the paper “The Provision of Incentives to Firms” was published in the Journal of Economic Literature and comprehensively reviewed the literature on providing incentives to firms. The authors pointed out that incentives are crucial for employee motivation and improving firm performance. Moreover, incentives can take many forms, including performance-based compensation, promotions, and career development opportunities. The paper also identifies factors that can influence the effectiveness of incentives in firms, such as incentive programmes, the characteristics of the workers subject to the programmes, and the level of competition in the labour market. In the end, the authors concluded that incentives could effectively improve firm performance. However, the design of each incentive programme is critical to its success. For instance, incentive programmes must be carefully structured to meet the interests of employees and managers. Published in the Journal of Business Research in 2015, the paper “The Impact of HR Practises on Labour Agency Costs” examines the relationship between human resource management (HRM) practises and labour agency costs. The authors claim that, by providing for the interests of both employees and managers, HR systems can help reduce labour agency costs. Moreover, every company sector increases its interest by increasing company profit. Furthermore, by emphasising communication, employee engagement, and training can help build trust between employees and managers, which can lead to higher employee engagement and lower employee turnover. In conclusion, the paper stated that HR practises for reducing labour agency costs could work significantly. However, this will depend on various factors, such as strategies and employee characteristics.