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There are two problems when a principal invests capital and hires an agent to do the work. The problems relate to inducing the agent to exert the optimal effort and to effect an optimal risk sharing arrangement. This paper introduces the concepts and enumerates the fundamental solutions to this agency problem. This approach is very useful in the managerial accounting area of determining the value of accounting information for setting performance evaluation and incentive payment schemes.

This paper aims to investigate, through the lens of the principal–agent problem, the relationship between payment of National Hockey League (NHL) salaries and player performance during the period of 2005-2011 and explore the inherent issues within the NHL player compensation and incentive structure.

The research adopts a pragmatic philosophy with deductive reasoning. This paper focuses on the NHL season 2005-2011 and undertake analysis of historical player contracts and performance data of 670 players across 29 clubs to undertake liner regression analysis.

This paper quantifies potential inefficiencies of NHL league contracts and defines the parameters of the principal–agent problem. It is identifies that player performance generally increases with salary, is higher in the first year of a contract and despite decreasing over the life of the contract, will usually peak again in the final year of the contract.

The research is based around figures from 2005-2011 and secondary statistical data. The study captures quantitative data but does not allow for an exploration of the qualitative perspective to the problem.

Entry-level or first contracts are good for all teams and players because they provide incentive to perform and a reduction of risk to the team should a player not perform to expectations. The same can be said for players at the other end of the spectrum. Although not typically used much, performance bonuses for players over the age of 35 allow clubs to “take a chance” on a player and the player can benefit by reaching attainable bonuses. These findings therefore provide contributions to the practicing managers and coaches of NHL teams who can consider the results to help shape their approach to management of players and the planning of teams and succession planning for talent.

The paper presents a comprehensive and current perspective of the principal–agent problem in NHL and extends the work of Purcell (2009) and Gannon (2009) in understanding player performance enhancement.

The moral hazard problem which obstructs external equity financing of farm businesses is studied using the principal‐agent framework. We assume that the supplier of external equity capital (the principal) cannot directly observe the farmer’s (agent’s) effort, but can observe the random outcome of the effort. We solve for the optimal farm income‐sharing rule that includes an extra share to the agent. The extra share is dependent on the random outcome and is provided to induce optimal effort from the agent. Results show a farmer’s effort is inversely related to the level of risk aversion and the riskiness of the project. Thus, an investor must share more income when a farmer is more risk averse or a project is more risky.

The purpose of this paper is to provide a critical historical analysis of the business (mis)behaviors and influencing factors that discourage enduring cooperation between principals and agents, to introduce strategies that embrace the social values, economic motivation and institutional designs historically adopted to curtail dishonest acts in international business and to inform an improved principal–agent theory that reflects principal–agent reciprocity as shaped by social, political, cultural, economic, strategic and ideological forces

The critical historical research method is used to analyze Chinese compradors and the foreign companies they served in pre-1949 China.

Business practitioners can extend orthodox principal–agent theory by scrutinizing the complex interactions between local agents and foreign companies. Instead of agents pursuing their economic interests exclusively, as posited by principal–agent theory, they also may pursue principal-shared interests (as suggested by stewardship theory) because of social norms and cultural values that can affect business-related choices and the social bonds built between principals and agents.

The behaviors of compradors and foreign companies in pre-1949 China suggest international business practices for shaping social bonds between principals and agents and foreign principals’ creative efforts to enhance shared interests with local agents.

Understanding principal–agent theory’s limitations can help international management scholars and practitioners mitigate transaction partners’ dishonest acts.

A critical historical analysis of intermediary businesspeople’s (mis)behavior in pre-1949 (1840–1949) China can inform the generalizability of principal–agent theory and contemporary business strategies for minimizing agents’ dishonest acts.

Several explanations for the Royal African Company’s failure around the turn of the eighteenth century have been suggested. The paper argues that these reasons can be integrated into a more comprehensive account of the company’s failure through the introduction of a modified version of principal-agent theory. Instead of focusing on abstract, dyadic relationships, the paper proposes a model that accounts for the meaningful character of principal agent interactions and for the complex networks and multiple role identities of actors within those networks that comprised principal-agent relations within the company. On the basis of this model the failure of the company can be seen as a result of contradictions between its dual role as both agent and principal. The symbolic importance of inefficient trading practices helps to explain why the company was unable to pursue alternative strategies or otherwise benefit from its monopoly.

This contribution argues that there is a fundamental problem for the multi-level governance (MLG) approach in that what the approach is trying to explain has never been fully agreed by the vast group of scholarship that references it. The chapter then examines and proposes that ideas and concepts from network governance, principal–agent (PA) and learning can provide the necessary micro foundations for the MLG approach.

The chapter examines and critiques the original MLG formulations and the later efforts at elaboration. It then reviews the literature and concepts for three public policy approaches that have been associated with European governance to see how core explanations can be elaborated upon in a multi-level context: network governance, principal–agent (PA) and learning.

This contribution suggests that co-ordination, and the resources that help maintain this co-ordination, is the key dependent variable that underpins the MLG approach. With multiple principals and multiple agents, operating at a number of levels of analysis, direct authority and control is harder to evoke. The key explanatory variable underpinning this MLG co-ordination is learning by the participants.

Researchers need to concentrate both their theoretical and empirical efforts in understanding the conditions that support multi-level governance and that sustain its effort.

The contribution outlines some of the key practical questions that policy-makers must face. Can they manage resources and induce learning from all the relevant public and private stakeholders to engage in the MLG effort?

Not only does an effective MLG process involve engaging a wide range of societal stakeholders, these stakeholders have to be persuaded to invest effort in learning about the nature of the governance system, the challenges of the policy problem and the implications of the efforts to resolve these problems.

This chapter isolates the fundamental lacuna at the heart of the MLG project and offers academics and practitioners a conceptual lens for building a clearer analytical structure for studying MLG.

The purpose of this paper is to show that the assignment of right between the principal and the agent, under which the latter have the management of the assets that the former own, is similar to that between citizens and politicians in representative democracy, and it could, in both cases, turn in to a state of being a voluntary hostage for the principal.

Those who take decisions either in the economy or in society/politics, actually through their continuous presence and acting, set the frame under which decisions will be made, i.e. which behaviour is acceptable, rules of the games, codes and terminology, values and hierarchy among participants.

Since principals abstain from the everyday decision making either in economics or in politics, they lose the ability to influence the frame and the practices on how decisions are made, and therefore decisions are evaluated with the criteria established by agents and they are not those which principals would possibly have.

A part of the management of the assets of principals in the economy or the “asset of vote” of citizens, especially in the long run, actually is conducted by the agents (managers‐politicians) to favour their own pursuits and not those of principals.

Under these circumstances the principal‐agent problem, either in economics or in politics, has two alternative solutions: either principal should take over the management of his assets, or accept the state of being voluntary a hostage of his servants‐agents (managers‐politicians).

Agency theory suggests that divergences will occur when a principal, e.g. client, and agent e.g. a project manager, interests are different in the execution of a project. The purpose of this paper is to explore if the agency theory can explain the subtleties integral to the behaviours and relationships between players delivering a public-private-partnership (PPP) in the context of an international development (ID) project. The intra-/interpersonal dynamics include governments, non-governmental organisations (NGOs) and private commercial service providers. The authors develop a conceptual framework and provide evidence from a case study of the testing of a Road Safety Toolkit in Kenya to explore several propositions.

Extant literature identified application of the agency theory, and the development of a conceptual framework. A case study describing an ID project was used to validate the propositions prior to the expansion of a research instrument for data collection in the field.

Through the lens of the agency theory and the limitations imposed by exploring a series of propositions, several insightful conclusions have been derived from the case. ID projects have particular nuisances that make them unique when compared to the majority of commercial applications. An added dimension and level of complexity is a consequence of the PPP incorporating government, NGOs and private corporations. The case exemplified the need for PPP ID projects to build on partner networks to influence and disseminate outcomes. Some agency problems were far less prominent than would normally be seen in a commercial project.

The methodologies presented in this paper need to be adapted and practiced in different kinds of ID projects in order to get confirmatory analytical results. The limitations imposed by the use of the single case, whilst drawing insightful conclusions, would necessitate greater testing in the field.

Although the problems of the agency theory are well researched in the operations management literature, there is limited application to ID projects and no previous research within the context of a PPP. Therefore, this work is important for greater understanding of the specific issues associated with project delivery of an ID.

Conflicting goals between principals and agents are common for organisations, which in turn affect inter-relationships on an international footing. The agency theory has had little attention in the project management field, yet is fundamental to relationships and communication.

There has been little research that explores the agency theory in the context of a PPP involving governments, NGOs and private commercial service providers, executed as an ID project. This work, therefore, exhibits new and novel findings.

Principal agent theory has its roots in the economic theory of the firm, decision theory, sociology, organizational theory, and more recently political science. However, there are only limited applications of the theory in the arena of public budgeting. This paper considers principal agent theory as an alternative method for explaining budgetary outcomes through an examination of interactive relationships not adequately captured by traditional hierarchical-based models of public budgeting. Because implicit and explicit contractual relationships pervade the entire budget making process, principal agent theory can make a major contribution toward developing more inclusive and accurate models of most stages of public budgeting.