Tracing the Evolution of Agency Theory in Corporate Governance

Abstract

This chapter aims, firstly, to conduct a literature review on the agency theory, which is the core theory of corporate governance, and secondly, to further strengthen the theory. It is the theory also used in many other fields such as politics, accounting, business, and law. The chapter starts a debate on the link between agency theory and stewardship theory. The literature review is based on peer-reviewed journal articles on the topic by reputable academics focused on agency theory, corporate governance, board characteristics, and ownership structure. The survey of the literature is based on the latest publications in recent years. Agency theory has been growing over time and its use and application in various fields have been extending. However, it has also been criticized for its shortcomings. The limitations it has brought forward have resulted in the stewardship theory addressing some of the shortcomings. The theory has great potential for growth and extension.