LITERATURE REVIEW

What is an agency problem? A conflict arising when people (the agents) entrusted to look after the interests of others (the principals) use the authority or power for their own benefit instead. This study is done on 12 papers below from the year 1988 to 2006 The various areas of implications of Agency Problem have been as follows. The chronological order is maintained to track the development in the concept.
1. REVENUE SHARING AS AN INCENTIVE IN AN AGENCY. Scott E. Atkinson et al [1988] 1 examined[nonmonetary costs of agents' actions may also mitigate the effectiveness of revenue sharing] considering[included a variable measuring coaching ability (COACH), which is a 1 if the team's coach had been named Coach of the Year any time between 1965 and 1981. We expect that an exceptional coach will be able to combine the same inputs more efficiently than an average coach] 2. DETERMINANTS OF LEVERAGE AND AGENCY PROBLEMS Ronald van et al [1999] 2 Examined [the debt-equity choice is irrelevant] considering [The Endogenous variables are leverage and the presence of four agency problems, i.e. direct wealth transfer, asset substitution, 7underinvestment] 3. AGENCY PROBLEM AND DIVIDEND POLICIES AROUND THE WORLD. Rafael La Porta,et al[1999] 3,examined[divdend payouts are higer in countries with good investor protection, better civil law ] considering[independent variables:(a)civil law (b)law protection (c)tax advantage of retained earnings ] 4. AGENCY PROBLEM AND OPTOMAL CAPITAL STRUCTURE. connie x mao et al[2002]4 examined[volatility of project cash flows increase with investment scale] considering[independent variable firm size , growth opprtunities, tangiblity of asset, non debt tax shield] 5. AGENCY PROBLEMS ARE AMELIORATED BY STOCK MARKET LIQUIDITY: Holmstrom et al [2002] 5examined [test the prediction of Holmstrom and Tirole (17993) that managers compensation is more closely tied to shareholder wealth when the firms shares trade more actively]considering[liquid stock markets can improve the alignment of managers and shareholders interests even though high stock turnover

would seem to be incompatible with the traditional view of monitoring of management by a stable set of shareholders] 6. NEGOTIATED COMPLIANCE: SOCIAL SOLUTIONS TO AGENCY PROBLEMS Andrew et al [2002] 6 Conclusion [The fact that this assumption makes hierarchical relations much more tractable does not make up for its overemphasis of the possibilities of control through incentive manipulation, and underemphasis of the role of the negotiation process itself]

7. THE IMPACT OF AN ETHICAL ENVIRONMENT ON MANAGERS PROJECTEVALUATION JUDGMENTS UNDER AGENCY PROBLEM CONDITIONS. Peter Booth Axel K.-D. Schulz et al[2003] 7 examined[agency problem conditions agency theory proposes that it would be economically rational for managers to continue projects that are failing.] considering [two independent variables were agency problem (present/absent) and ethical environment (strong/weak).] 8. EXECUTIVE COMPENSATION AS AGENCY PROBLEM Lucian Arye [2003] 8 Conclusion [managerial power substantially affects the design of executive compensation.]

9. An Agency Costs Theory of Trust Law

Combs and Ketchen et al [2004] 9 examined [The agency costs analysis of this Article demonstrates how and why use of the private trust triggers a temporal agency problem.] considering[variable Y is a dummy-coded (Yes/No) variable that asked the franchisor respondents whether they seek overseas expansion beyond North America.] 10. AGENCY PROBLEMS AND LEGAL STRATEGIES. Henry et al [2004] 10 Conclusion [As in the case where there is intrajurisdictional choice of alternative forms, mandatory rules in any given jurisdictionscorporation law may serve not to constrain choice of form but actually to enhance it, by making it easier for firms to signal, and to bond themselves to, their choice among alternative attributes.]

11. REMUNERATION:WHERE WE HAVE BEEN,HOW WE GOT THERE, WHAT ARE THE PROBLEMS, HOW TO FIX THEM? Michael C [2004] 11 Conclusion ["while executive compensation can be a powerful tool for reducing the agency conflicts. Source of agency cost should be managed."]

12. AGENCY PROBLEMS AT DUAL-CLASS COMPANIES* Ronald et al [2006] 12 examined [Managers with great control rights in excess of cash flow rights are more likely to pursue private benefits at the expenses of out side share holders] considering [Acqirer return as our primary dependent variable, excess control rights as our key explanatory variable, acquirer and dealer specific characteristics as specific variable]

CONCLUSION
The agency problems associated cost can be minimized through various legal measures. The two corporate legal strategies that play a vital role in reducing agency costs are regulatory strategies and governance strategies. 1Managers high ethical predisposition may reduce managers tendency to act in their self interest. Given greater efficacy of external monitoring implies that stock market liquidity sets bounds on size and complexity of diversified firms. As the insider control cash flow rights become larger ,dual class acquirers experience lower acquisition announcement periodic abnormal stock returns, CEO receives higher levels of compensation and less return to shareholders .Agency theory reestablishes the importance of incentives and self interest in organizational thinking. The executive compensation can act as powerful tool for the minimizing agency conflicts. Agency approach is highly relevant to an understanding of corporate dividend policies around the world. The theory provides a unique, realistic and empirically testable perspective on problems of cooperative effort.

1 Scott E. Atkinson Linda R. Stanley an John Tschirhart , Revenue sharing as an incentive in an agency

problem: an example from the National Foothall League, RAND Journal of Economics Vol. 19, pp 10-18 2 Abe de Jong Ronald van , Determinants of leverage and Agency problems, Fourth draft,

JEL category: G32, pp 1-30 3 Rafael La Porta, Silances, Shleifer, Robert Vishny , Agency problem and Dividend policies around the world, Malen Journal, Vol.19, pp 1-34 4 Connie X Mao, Agency problem and Optimal capital structure, JEL Classifications: G31 G32, pp 1-25

5 Holmstrom and Tirole, Agency Problems are Ameliorated by Stock Market Liquidity, JEL classification: J33; G32 , pp 20-31 6 Andrew B. Whitford, Negotiated Compliance: Social Solutions to Agency Problems, Mackew , Vol.8, pp 1-32 7 Peter Booth Axel K.-D.Schulz, The impact of an ethical environment on managers project evaluation judgments under agency problem conditions, Pergamon , Vol. 4 , pp1-24 8 Lucian Arye Bebchuk , Executive compensation as agency problem, Journal of Economic Perspectives, pp 71-92
9 Robert H. Sitkoff , An Agency Costs Theory of Trust Law, Law and economics paper series

research paper no. 03-06 10 Henry Hansmann and Reinier Kraakman , Agency Problems and Legal Strategies, Excellence, Vol. 12 , pp 19-42
11 Kevin.j.Murphy Eric.g.Wrick Micheal.c.Jensen, Remuneration:where we have been,how we got there, what are the problems, how to fix them?, Harvard business school nom research paper no. 04-28

12 Ronald CongWang.Fei Xie, Agency Problems at Dual-Class Companies , Gompe , Vol. 11, pp 21-46