The effect of incentive scheme in reducing agency cost of an organization
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Date
2023-12-15
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Publisher
AAU
Abstract
The primary goal of this study was to evaluate how incentive scheme impact in reducing agency
costs within organizations. It sought to understand the root causes of agency costs and the
effectiveness of incentive schemes in diminishing the conflict of interest between the principal and
agent that creates agency cost. Data was gathered through a questionnaire, with the first section
focusing on demographic details and the second section addressing questions related to the causes
and effects of agency costs. Analysis was conducted using an ordinal scale, organizing responses
numerically. The results underscored the significance of agency problems in generating agency
costs and demonstrated the positive influence of incentive schemes in addressing them. The study
advocates for the implementation of diverse incentive structures encompassing both intrinsic and
extrinsic motivators. Additionally, it suggests enhancing the ownership stake of managerial
personnel to effectively tackle agency costs within organizational setups.