The Principal-agent Theory Of Modern Enterprises And Market Mechanisms

This text starts with the owner and operator's function of modernenterprise and utilizes such models as the game theory (play chessrepeatedly ) ,etc. to carry on the real example and analyse .it is discussed howto utilize a series of incentive mechanisms to make the operators work hardand how to optimize the resources most to fully utilize the funds which doesnot belong to his own in order to realize the real property right separated andto make the goals of the enterprise owner and enterprise's operator try one'sbest to reach unanimity. This text supposes the owner and the operatorrelations as the principal-agent relation and analyses the question from thisangle in order to realize the profit of the company maximized.In the course of industrialized capitalism the joint-stock companygradually substitutes for the owner enterprise to become the main businessenterprise organization, and its representation is the separation ofentrepreneur's function besides socialization of capital and a share of artificialperson. At classical enterprise, the capitalist who provides what is capitalizedon undertakes the management, and its reward is the enterprise's grossearnings after the fixed salary that is paid to the other production factor. Justbecause the wealth of capitalist and business enterprise are related closely,enterprise embodiments capitalist's intent to going after profits.According to this tradition microeconomics considers enterprise asrational person to maximize profits. However in stock company, customarycapitalist offering funds, the executive dominates assets. Berle and Meansthink that owing to the lacking of supervising the executive, the corporationcan be guided to pursue other targets excluding of profits.This text deems that when the ownership of business and managementare separated, enterprise surplus is distributed to its team members over again,but this kind of change is acceptable to capitalists. As far as earnings isconcerned, specialization increased the output, capital's surplus risesaccordingly .On the other hand, the risk that capital undertake is lowered dueto capital market. So even if executives may consume enterprise's surplus,capitalists prefer to investing joint-stock company on the basis of avail. This iswhy stock companies come forth in abundance. That is to say a certainmechanism assure that capitalists can gain content income.Residual claim canexcite executives. The direct distribution obtains power for parts of surplus ofmanager to encourage its behavior, but it must want to take strict valid directmechanism as the premise.This is the foundation of the modern businessenterprise's principal-agent theory.In classic business enterprises, the capital possesses all surplus to obtainthe power.If the surplus income shows the minus quantity,it means that it willundertake the risk.In the joint-stock company the executive's behavior isdifficulty to observe and control if fix income is give. And this would affect tothe benefits of capitalists. Therefore, it is necessary to give the executive somestimulation-residual claim. In fact, the earnings that the executive will achievein future is contacted with his endeavor and targets.In the process ofmanagement executives have the advantages of information, but shareholderscan acquire some signals after all. For example education background perhapsmanifests executives' capabilities. His outstanding achievement and reputationaccount for his behavior. These information helps director to monitorexecutives who dare not deviate the principle of maximizing profits too far.Certainly, collecting information can expend some cost, and it demandsrational balancing the income and the cost.Suppose the game betweenexecutives and stockholders were single stage, managers would consider theaffect of outcome on future revenue. Thus reputation means nothing toexecutives ,and it turns out that managers need not work hard or restrictedlyconsume substance of corporation to satisfy their own demand. If time isimportant, games between stockholders and executives are infinitely repeated.So result of current stage is significant to Managers, and owners of capital ormanager market may evaluate their behavior. As long as discount rate isenough, Managers must consider future income and restrain inappropriateconsumption with their position.Team members in the business enterprise are impossible to be affectedintensely by product and production factors markets. Furthermore, markets candirectly evaluate members to a certain extent. Competitive product marketreflects a certain member's contributions if he decides primarily output ofbusiness enterprise. A manager is key character of a company, and his actionand performance directly influence even determine how to run the company. Sothe paper think that product's price, namely cost information make out amanager's accomplishment. On the manager market potential executives urge amanager to administer his corporation in stead of lazing. Fluidity anddecentralization lead that capital invested to various industries undertakealmost equal risk and claim the same yield. Indirectly capital market estimatesexecutive's performance.All of these measures in fact is mutual contact andreinforce each other. Presupposition of infinitely repeated game is that creditshould come into being on the manager market on the base of executive's...