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Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure

1979; Springer Nature (Netherlands); Linguagem: Inglês

10.1007/978-94-009-9257-3_8

0924-6002

Michael C. Jensen, William H. Meckling,

Economic theories and models

In this paper we draw on recent progress in the theory of (1) property rights, (2) agency, and (3) finance to develop a theory of ownership structure for the firm.1 In addition to tying together elements of the theory of each of these three areas, our analysis casts new light on and has implications for a variety of issues in the professional and popular literature, such as the definition of the firm, the “separation of ownership and control,” the “social responsibility” of business, the definition of a “corporate objective function,” the determination of an optimal capital structure, the specification of the content of credit agreements, the theory of organizations, and the supply side of the completeness-of-markets problem.