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Article

Theory of the firm: Managerial behavior, agency costs and ownership structure

Michael C. Jensen; William H. Meckling · Journal of Financial Economics 3(4), 305–360 · 1976

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Type: Article
Author: Michael C. Jensen; William H. Meckling
Identifier: DOI 10.1016/0304-405X(76)90026-X
Accessed: 2026-09-01

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EstablishedJensen and Meckling formalised agency costs as the sum of the principal's monitoring expenditures, the agent's bonding expenditures and the residual loss from divergence between the agent's decisions and those that would maximise the principal's welfare.