A Thorough Examination of Agency Theory and Agency Costs in M&A

ABSTRACT :

M&A decisions are often aimed at strategic goals like economies of scale, market expansion, or diversifying operations. Yet, these objectives can be impeded by agency costs stemming from conflicts between shareholders and managers. Agency costs manifest in forms such as high executive pay, managerial turnover, and resource misallocation. Therefore, grasping and scrutinizing agency costs in M&A is crucial for mitigating adverse impacts on transaction success. This analysis intends to highlight various facets of agency costs in M&A, covering types, causes, and organizational mitigation strategies.