Principal agent theory

I have reviewed the search results.

External Links Selection:

1. Origin: Michael Jensen and William Meckling's 1976 paper "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure" is consistently cited as the origin. Several results (e.g.,²¹,²⁰,¹⁹,¹⁸,¹⁷,¹⁶) refer to it. EconPapers¹⁵ and Simon Fraser University¹⁴ provide direct links to the paper or its abstract/citation. Simon Fraser University¹³ seems to host a PDF directly. I will use a direct link to a reliable academic source that hosts this paper or its abstract/citation with sufficient context. RePEc/EconPapers is a good option. I'll use the EconPapers link for the Jensen and Meckling paper as it's a stable academic citation source.

   • URL: https://EconPapers.repec.org/RePEc:eee:jfinec:v:3:y:1976:i:4:p:305-360 (Verified this is live and provides access to bibliographic data and sometimes full text/abstract).

2. Application/Regulation (Corporate Governance): CFA Institute Research and Policy Center¹²,¹¹ provides a good overview of the principal-agent problem in finance and its application in asset management and banking. I will use the CFA Institute link for application.

   • URL: https://www.cfainstitute.org/-/media/documents/pdf/research/rp-center/principal-agent-problem-in-finance-summary.pdf (This is a PDF. The prompt says "no gated PDFs". Let me find another one or a non-PDF version from CFA Institute if possible. Ah, wait, the prompt says "no gated PDFs" but it doesn't explicitly forbid all PDFs if they are freely readable. Let me check the PDF. It's a publicly accessible PDF summary. This might be acceptable. Let me check the CFA Institute main site for a non-PDF version. If not, I'll go with a general corporate governance article from SEC or a news source.)
   • Re-evaluating: Source mentions AI applications and financial services in general. Source¹⁰ talks about corporate governance issues in A-Level Economics. Source⁹ Plutus Education also discusses agency theory in financial management. CFA Institute⁸ and⁷ are good but are PDFs.
   • Let's check for an SEC or reputable financial news source for corporate governance application. Result from Vertex AI search provides a good general overview that seems to be a financial education resource. It mentions "Shareholders (principals) and corporate executives (agents)" and "Laws and regulations that enforce fiduciary duties". This seems like a better fit for a general finance encyclopedia and is not a PDF.
   • URL: The first search result, https://vertexaisearch.cloud.google.com/grounding-api-redirect/..., is a redirect from the search tool. I need to find the actual domain. The content mentions "What Is a Principal-Agent Relationship: What It Is, How It Works, and New Developments". It looks like a summary of various sources. I need a direct, stable URL.
   • Let me refine my search for a corporate governance application.
   • New search: "SEC principal agent problem corporate governance report" or "corporate governance principal agent problem financial times"

3. Critique/Limitation: Result⁶ "A critique of the Principal-Agent theory as applied to the design of engineering contracts" from ResearchGate, or⁵ "Controversies about Agency Theory as Theoretical Basis for Corporate Governance" from Biblioteka Nauki (a Polish academic database) or⁴ from FasterCapital titled "Criticisms And Limitations Of Agency Theory" seem relevant. Biblioteka Nauki³ seems like a more general academic critique of agency theory in the context of corporate governance. This seems suitable as it discusses broader criticisms rather than just one specific application.

   • URL: https://bibliotekanauki.pl/articles/2143003.pdf (This is also a PDF. Let me check if it's gated. It appears freely accessible. Again, the prompt says "no gated PDFs", not "no PDFs". I will keep this in mind. If I find a web page with similar content, I'll prefer that).
   • Re-evaluating for critique: FasterCapital² "Criticisms And Limitations Of Agency Theory" is a web page. This is preferable.
   • URL: https://fastercapital.com/content/Criticisms-And-Limitations-Of-Agency-Theory--Agency-theory-The-Principal-Agent-Relationship-in-Modern-Firms.html (Verified: live and readable).

4. Another application/example: Result¹ "The Ultimate Guide to Principal-Agent Theory in Macroeconomics - Number Analytics" mentions applications in "Financial Markets: Bank Lending Practices" and the "2008 Financial Crisis". This is a good real-world example.

   • URL: https://numberanalytics.com/principal-agent-theory-macroeconomics/ (Verified: live and readable).

Okay, let's re-confirm the external links:

1. Origin: Jensen and Meckling (1976) - EconPapers https://EconPapers.repec.org/RePEc:eee:jfinec:v:3:y:1976:i:4:p:305-360

2. Application (General Finance/Corporate Governance): What Is a Principal-Agent Relationship: What It Is, How It Works, and New Developments (from one of the search results, I need to get the actual domain for this). Let's search again to find a stable and direct URL from a reputable financial site.

   • New search: "investopedia principal agent relationship" (Investopedia is listed as a potential comparison, but it is a reliable source for definitions. I should use it as an external source if it meets the criteria, since the prompt implies exceeding Investopedia's quality for my article, not prohibiting citing it for external information).
   • Result is from Investopedia and explains the principal-agent problem. This is a very good general definition and application link.
   • URL: https://www.investopedia.com/terms/p/principal-agent-problem.asp (Verified: live and readable).

3. Critique/Limitation: FasterCapital "Criticisms And Limitations Of Agency Theory" https://fastercapital.com/content/Criticisms-And-Limitations-Of-Agency-Theory--Agency-theory-The-Principal-Agent-Relationship-in-Modern-Firms.html (Verified: live and readable, different domain).

4. Application (Real-world example like financial crisis): Number Analytics "The Ultimate Guide to Principal-Agent Theory in Macroeconomics" https://numberanalytics.com/principal-agent-theory-macroeconomics/ (Verified: live and readable, different domain).

This set of 4 external links looks solid: EconPapers, Investopedia, FasterCapital, Number Analytics. Three different trusted domains. All real, live, and readable.

3. STEP 2 — WRITE THE ARTICLE:

I will now proceed to write the article, ensuring all sections are covered, links are placed correctly and once, and style guidelines are followed.

Inferred Terms:

• [TERM]: Principal agent theory
• [RELATED_TERM]: Agency problem
• [TERM_CATEGORY]: Corporate governance and Microeconomics

LINK_POOL (Internal):

1. Agency costs (https://diversification.com/term/agency-costs)
2. Fiduciary duty (https://diversification.com/term/fiduciary-duty)
3. Corporate governance (https://diversification.com/term/corporate-governance)
4. Information asymmetry (https://diversification.com/term/information-asymmetry)
5. Moral hazard (https://diversification.com/term/moral-hazard)
6. Adverse selection (https://diversification.com/term/adverse-selection)
7. Shareholder (https://diversification.com/term/shareholder)
8. Incentive (https://diversification.com/term/incentive)
9. Contract theory (https://diversification.com/term/contract-theory)
10. Executive compensation (https://diversification.com/term/executive-compensation)
11. Risk aversion (https://diversification.com/term/risk-aversion)
12. Stakeholder (https://diversification.com/term/stakeholder)
13. Decision-making (https://diversification.com/term/decision-making)
14. Behavioral economics (https://diversification.com/term/behavioral-economics)
15. Financial markets (https://diversification.com/term/financial-markets)

I will now draft the article, carefully embedding these links.