Agency and Self-Enforcing Contracts

Posted: 15 Jan 2001

See all articles by Zhigang Tao

Zhigang Tao

The University of Hong Kong - School of Business

Tian Zhu

Hong Kong University of Science & Technology (HKUST) - Division of Social Science

Abstract

This paper studies the role of agency in the self-enforcement of interfirm contracts. When interfirm transactions are carried out by the agents rather than the owners, the agents' incentive to breach a contract for the benefit of their firm is typically lower than that of the owners if doing so entails a personal cost or a loss of private benefits. Thus agency has a commitment value in making contracts self-enforcing. The cost of agency is the typical moral hazard problem. Implications are drawn for transition economies in which formal institutions for contract enforcement are weak.

JEL Classification: D81, D82

Suggested Citation

Tao, Zhigang and Zhu, Tian, Agency and Self-Enforcing Contracts. Journal Of Comparative Econ., Vol. 28, No. 1, Pp. 80-94, March 2000, Available at SSRN: https://ssrn.com/abstract=228545

Zhigang Tao (Contact Author)

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China
(852) 2857-8223 (Phone)
(852) 2858-5614 (Fax)

Tian Zhu

Hong Kong University of Science & Technology (HKUST) - Division of Social Science ( email )

Division of Social Science
Clear Water Bay
Clear Water Bay, Kowloon
Hong Kong

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
870
PlumX Metrics