Agency Theory In The Application Of Management Accounting Research,

This article is an normative study on the application of agency theory tomanagement accounting in China. The goal is to solve the agency problems inChinese enterprises and make theoretic supports for the development ofmanagement accounting in China.This article consists of three sections:In the first section, the author initially makes a systematic introductionof agency theory, including its origin, contents and characteristics. Then theauthor reviews literature on agency theory's application to managementaccounting.In the second section, an investigation is conducted into the applicationof agency theory to management accounting in three aspects: budget control,performance evaluation system and incentive plans. From these applications,it is found that agency theory can not only broaden the research area ofmanagement accounting, it also promotes the strategic status of traditionalmanagement accounting.In the third section, the author analyzes the unique principal-agentrelationship in Chinese enterprises, which is the source of serious agencyproblems in China. Compared with the common western corporations,Chinese enterprises, especially SOEs(state-owned enterprises) have quiteunusual principal-agent relationship, which makes obstacles for the successfulapplication of agency theory to management accounting. To solve theseagency problems, the author proposes that an incentive and constraintmechanism should be set up to make agents willing to work for the interestsof principals.