Analysis Of Effectiveness Of Agency Cost Incurred By Government Owned Medium Public Company's Merge And Acquisition

Agency theory is always an issue in modem Enterprises. There is an asymmetric between management and stakeholders and that would results in a situation of separation in ownership and operation, which potentially causes the conflicts among parties and potential agency cost as well. High agency cost will put a lot of barriers to companies. Therefore, how to minimize agency cost can be critical for companies. In particular, MBO is one of significant approaches. It could better guild firm to deploy management stimulation methods.Hence taking full use of MBO can be beneficial and further, minimizing the cost is of more practical meaning.Essentially, this essay initially reviewed the influence of agency cost, then described the relationship between Principal and agent, furthermore it covered the types of principal-agent cost as well as analysis of effectiveness of MBO in government owned medium listed company. In particular, this essay selected the time slot at the period from year 2000 to 2013 and picked up the different variables from various indexes measured in MBO and agency cost and then established the demonstration data. At the same time, it took use of fixed effectiveness model to prove the agency cost and draw the points in a couple of dimensions:descriptive statistics, overall trend and various other indexes. In addition, this essay summarized the core factors of minimizing agency cost from similar companies in a lot of developed countries and therefore illustrated the lessons to China in the areas of pricing,merging metrics and regulations. Based on those analysis, this essay then gave a series of suggestions on how should those listed medium companies operate, including different stages targets, acquisition host, merging approaches and regulative controlling.