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Agency theory explores the relationship between principals (owners or shareholders) and agents (managers) in a company, highlighting potential conflicts of interest. In a listed company, managers may prioritize personal goals over shareholder value, leading to agency costs. Shareholders, as providers of equity finance, seek to align managerial actions with their interests through mechanisms such as performance-based compensation, oversight, and governance structures. These strategies aim to mitigate the risk of managers acting in their own self-interest rather than maximizing shareholder returns.

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3w ago

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