We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Agency theory linked to management accounting - Essay Example

Comments (0) Cite this document
The behavioural premise of the innovative financial-economic theory is based contradict to the thoughts of trustiness, faithfulness, loyalty, stewardship, and care for others that motivate the conventional principal-agent association. The conventional conception of agency is established on ethical measures. …
Download full paper
Agency theory linked to management accounting
Read TextPreview

Extract of sample
Agency theory linked to management accounting

Download file to see previous pages... The behavioural premise of the innovative financial-economic theory is based contradict to the thoughts of trustiness, faithfulness, loyalty, stewardship, and care for others that motivate the conventional principal-agent association. The conventional conception of agency is established on ethical measures. But the theory in the conventional sense is not possible as human beings are rational maximizers. Duska (1992) elucidates as: "To do something for another in a system geared to maximize self-interest is foolish. Such an answer, though, points out an inconsistency at the heart of the system, for a system that has rules requiring agents to look out for others while encouraging individuals to look out only for themselves, destroys the practice of looking out for others"Another point of view is that as individual rewards are openly connected to individual venture efficiency than collective rewards managers prefer individual motivation allocation (Hayes, 1976).Agency theory accepts that employees and employers have diverse ends, behave in a self-interested way, and are eager to presume altering points of risk. In this paper, a review of how incentive remuneration plans can help create a commonality of interest between the two groups is examined.The agency theory presumes that the agent and the principal are self-interested and try to make the most of their gains in their relationship. A simple instance is the case of a store manager who acts as an agent of the owner. The store manager desires for as much rewards for his work as possible that too for as little work as feasible. But at the same time the store owner would look for the manager to work the maximum for a very little pay as possible. This premise drops the themes of honesty and commitment from the agency association as their inappropriateness with the basic theory of balanced maximization. According to DeGeorge (1992) "The job of agency theory is to help devise techniques for describing the conflict inherent in the principal-agent relationship and controlling the situations so that the agent, acting out of self-interest, does as little harm as possible to the principal's interest".
In reality management accounting study has an extended past of researching how incentives sway behaviour (Luft & Shields 2003; Bonner & Sprinkle 2002; and Young & Lewis 1995).
Organisations have from a very long time made use of incentives as a means for adjusting the involvements of managers and of employees with the interests of the firm and its shareholders. For instance, in the 1980s, CEO Roger Smith brought in operation dependent pay to the line workers at GM. Thus when GM was doing well, the workers also was doing well (Business Week, 1900).
One primary anxiety for managers who want to stimulate their workers is how to allocate financial motivators among team members(Ramaswami & Singh, 2003). Particularly, managers have to settle on, amid other things,
(1) How much contingent dependent remuneration should be
(2) How financial inducements should be allotted among the workers.
The sharing of performance payoffs is mainly motivating and brings forth much academic dispute about suitable allotment rules (Meindl, 1989).
Incentive Plans
Performance plans extend the managers' verdict sphere by rewarding them on the attainment of some accounting-based events over a period running from three to six years instead of current annual performance (Kumar and Sopariwala, 1992; Enis, 1993). Actually plans based on performance are of two types: performance unit plan or performance share plan.
Healy & Wahlen (1999) stated that market anticipations, management reward and rigid interference were the principal components attractive earnings management. Fields et al (2001, p. 260) states that "when managers exercise their discretion over the accounting numbers with or without restrictions". In reality managers or agents are motivated to maximise the firm's value ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Agency theory linked to management accounting Essay”, n.d.)
Retrieved from https://studentshare.org/management/1503854-agency-theory-linked-to-management-accounting
(Agency Theory Linked to Management Accounting Essay)
“Agency Theory Linked to Management Accounting Essay”, n.d. https://studentshare.org/management/1503854-agency-theory-linked-to-management-accounting.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
Organisational Context of Management Accounting
This essay addresses the problems of management control and accounting that was persistent at Ivy League University which lead it to introduce new ERP system. The problems have been analyzed from three perspectives i.e. agency theory, contingency theory and institutional theory and has addressed mainly the potential problems of principal-agent and the management accounting system in an organization.
9 Pages(2250 words)Essay
ACCOUNTING THEORYIntroduction To better understand accounting theories there is need to develop an understanding of what accounting is in the first place. This picture is best painted by looking at the history of accounting that will also provide insight into the various accounting theories.
8 Pages(2000 words)Essay
Accounting Theory
It was found that factors like lack of information, the fraudulent information or possible connivance of Enron executives the companies auditor may have caused the non-impounding of various factors to the
16 Pages(4000 words)Essay
Agency theory
This is where the agency theory gains significance. However, in actual management, the agents come across conflicting situations where they have to balance the interests of all
16 Pages(4000 words)Essay
Accounting Theory
However, these figures depend entirely on the accounting policies, theories and methodologies adopted by the organization and in many
7 Pages(1750 words)Essay
Agency theory

The author states that the notion of stakeholder concept is that values are vital and a tangible part of operating business. Freeman states that stakeholder concept is about management, and it mirrors and guides how managers function rather than chiefly addressing management and economists’ theories.

4 Pages(1000 words)Essay
Accounting theory
The accounting information and financial statements guide investors and shareholders about the level of corporate success that a business has achieved so it is
7 Pages(1750 words)Essay
Accounting Theory
Corporate social reporting in the UK began to take shape during 1970s when social Audit Limited was formed to conduct external audits to assess firm’s social effects. In early 1990s,
6 Pages(1500 words)Essay
Accounting systems and structure of China
The evolution process of accounting system in China occurred as a result of many theories and writings in accounting and finance (Ball et al., 2003). From the historical perspective, this paper considers different information on the claim that Chinese
12 Pages(3000 words)Essay
Accounting Theory
A critical perspective of accounting is mainly concerned with promoting a better society. Critical accounting research is based on a classical technique that challenges the present structure and nature of the society. Environmental and social
2 Pages(500 words)Essay
Let us find you another Essay on topic Agency theory linked to management accounting for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us