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Archives of Business Research – Vol. 13, No. 03
Publication Date: March 25, 2025
DOI:10.14738/abr.1303.18487.
Awodun, M., & Adam, L. (2025). The Agency-Governance-Disruptions Model for Operational Efficiency, Profitability and Value
Delivery: An Application to Private and Public Enterprises in Nigeria. Archives of Business Research, 13(03). 171-190.
Services for Science and Education – United Kingdom
The Agency-Governance-Disruptions Model for Operational
Efficiency, Profitability and Value Delivery: An Application to
Private and Public Enterprises in Nigeria
Muritala Awodun
Centre for Enterprise and Human Capital Development
Crown-Hill University (now Ojaja University),
Eiyenkorin, Kwara State, Nigeria
Lukman Adam
Department of Economics, Faculty of Social Sciences
Kwara State University, Malete, Kwara State, Nigeria
ABSTRACT
In relating the agency theory to corporate governance and technological
disruptions in organizations, this paper examines this tripod through the creation
of an agency-governance-disruptions model. The paper relates the model to
operational efficiency, profitability and value delivery in selected private and
public enterprises in Nigeria. The outcome reveals that the tripod of agency- governance-disruptions, as presented through the model, significantly impacts on
operational efficiency, profitability and value delivery of organizations in Nigeria.
This is based on applying the model to selected private and public universities in
Nigeria, with the findings revealing that the agency-governance-disruptions model
has a very significant impact on the efficiency, revenue generation/profitability and
value delivery of the private universities, while for public universities, on the other
hand, the effects are not so significant.
Keywords: agency theory, corporate governance, technological disruptions, operational
efficiency, profitability, value delivery
INTRODUCTION
There are three main concepts involved in the derivation of our agency-governance-disruptions
model, and each of these concepts are worthy of description and understanding. This paper
presents each of the concepts with the intention of aggregating thoughts about them and taking
a position on why they are relevant in our model. The integration of these three concepts in
formulating our model is subsequently justified, and the relevance of each, in affecting the
fortunes of an organization, is measured through a look at operational efficiency, revenue
generation/profitability and value delivery. How our model affects different types of
organizations is extracted by applying the model to some selected private and public
universities in Nigeria.
The concept of agency theory as presented by Berle and Means (1932), Fama and Jensen
(1983a, 1983b); and Jensen and Meckling (1976) is directed at a particular type of organizing
problem, called agency problem (Eisenhardt, 1989). Agency theory models the relationship
between a principal and an agent, and considers the optimal contract form for the ubiquitous
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relationship where a principal, delegates work to an agent (Eisenhardt, 1989; Awodun, 2007,
2018). Agency theory is built on the notion that separation of ownership and control potentially
leads to self-interested behaviors by the agent. In agency theory, both the principal (i.e.,
shareholders, who are the owners of the enterprise) and the agent (i.e., managers of the
enterprise) are depicted as utility maximizers (Jensen and Meckling, 1976; Fama and Jensen
1983a). The agent’s utility function includes power, security, status, and wealth, while the
principal’s utility function is to maximize the market value of their shares, an ultimately, their
wealth (Awodun, 2018).
Corporate governance, on the other hand, is the process that guides the relationship between
the company and the stakeholders through the determination and control of the strategic
direction and performance of the company (Awodun, 2018). It is the system through which
organizations are directed and controlled towards achieving the purpose of their
establishment. This structure specifies the distribution of rights and responsibilities among the
various corporate participants, including board members, executives, shareholders and other
stakeholders, spelling out the rules and procedures for making decisions on corporate affairs
(Luo, 2005a). Corporate governance also provides the structure through which the company
sets objectives, the strategy for attaining those objectives and the guidelines for monitoring
performance (Awodun, 2007).
Governance contributes to the firm’s legitimacy and the credibility of its decisions and
reporting. In the context of private enterprises, corporate governance is the system that not
only monitors the relationship between executives and stakeholders (including shareholders),
but also directs its various business units and pinpoints the distribution of power, rights and
responsibilities among critical participants in the corporate-level decision-making process that
affects the general corporate affairs (Awodun, 2018). For the public enterprises, however,
corporate governance monitors the relationship between the managers of such enterprises and
the various stakeholders, including the executive arm of government, the legislative arm of
government and the citizens (in terms of value delivery).
Technological disruptions are seen as the convergence between new business models, new
technologies, and new combinations of existing approaches to create a competitive advantage,
such that one business is positioned to take market share away from other businesses through
better and improved performance. It affects both private and public enterprises differently, for
reasons of structural ownership, management and operational differences, and not for any
reason of technical divergence.
Technological disruption represents an increase in the use of machine-driven automation of
operational processes and workflows that were previously undertaken, or at the very least,
overseen, by humans. The introduction of technology, enables greater operational efficiency
and opens up opportunities to create new revenue streams, improve productivity, increase
profitability and ultimately, value delivery.
Disruption is all about adaptation to the alternative of using technology to replace what human
is doing, and is often discussed through the lens of outmaneuvering an incumbent, or
challenging the status quo. It is good to note that many private enterprises are successfully
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Awodun, M., & Adam, L. (2025). The Agency-Governance-Disruptions Model for Operational Efficiency, Profitability and Value Delivery: An Application
to Private and Public Enterprises in Nigeria. Archives of Business Research, 13(03). 171-190.
URL: http://doi.org/10.14738/abr.1303.18487
leveraging new technologies to adapt to new markets and evolve their offerings. They often have
the resources and are quicker to make larger investments into emerging technologies than their
public enterprises compatriots.
Technological disruption has been occurring since people first started trading goods and
services, and will continue for as long as we continue to innovate. Disruptions could come from
within the organization, which is called internal disruption. At the same time, disruption could
be as a result of technological changes from outside the organization, but within the market,
which is referred to as external disruption.
The above conceptual clarifications have given credence and understanding to the concepts that
make up our agency-governance-disruptions model. In the section that follows, we present a
review of literature by digging deeper into the basis of these concepts. Thereafter, we present
the model itself, with some further clarifications to the underlying factors that brought about
our conceiving it. We also, relate the model to private and public universities, as our
representation of private and public enterprises, in our attempt to measure the impact of the
model on the three variables of operational efficiency, revenue generation/profitability and
value delivery in these enterprises. Our findings and the analysis of these findings are presented
next. This is followed by our recommendations and conclusion, in that order, as the final analysis
of this paper.
LITERATURE REVIEW
In agency theory literature, the primary agency problems popularly referred to are moral
hazard (MH) and averse selection (AS) (Eisenhardt, 1989). MH is a problem resulting from the
situation where the principal cannot observe or monitor the agent’s actions. Arrow (1985, p.
37) says that the problem here arises when “the agent’s action is not directly observable by the
principal.”
Averse selection (AS), on the other hand, is a problem resulting from the situation where the
principal can observe the agent’s actions, but cannot assess whether these actions best serve
the principal’s interests. Arrow (1985, pp. 38-39) opined that the problem, in this situation,
arises when “the principal may be able to observe the action itself, but does not know whether
it is the most appropriate one.”
According to Mitnick (1994), the critical difference between MH and AS is that in MH the
principal cannot observe the agent’s actions, allowing the agent to take actions that have
undesirable consequences for the principal, while in AS, the principal may well be able to
observe the agent’s actions, but the principal cannot tell whether the agent’s actions are optimal
with respect to the principal’s interests or not (Awodun, 2018). Thus, it is quite conceivable
that agency problems could be aggravated if it becomes more difficult for the principal to
observe and judge what the agent is actually doing and has done for the principal. Both are
predominantly of more concern in public enterprises than in private enterprises for obvious
reasons.
Agency theory is considered appropriate to situations that have a principal-agent structure.
Specifically, in the case of private enterprises, the headquarters-foreign subsidiary relationship
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in multinational enterprises can be considered a good example of a principal-agent structure,
since the headquarters delegates decision-making authorities and responsibilities to foreign
subsidiaries (Gupta and Govindarajan, 1991; Nohria and Ghoshal, 1994; Roth and O’Donnell,
1996). Beyond this, the shareholders, who are the owners of the private enterprise, constitute
the principal, and delegate authority to the management of the private enterprise, in this
situation seen as the agent, to operate the enterprise on their behalf, and in their interest.
The extent of difficulty to which the principal (i.e., the shareholders or the public as the case
may be) faces in the observation and verification process could be dependent upon the strategic
roles of the agent (i.e., the board and management of the enterprise). Just like in the case of
multinational enterprises where the foreign subsidiaries face different levels of agency
problems in their relationship with the headquarters depending on the strategic role they are
undertaking – i.e., specialized contributors, local implementers, and world mandates (Kim et al.,
2005), the public enterprises are not different in their exhibition of different levels of agency
problems also.
Another critical question often omitted from the discussion on corporate governance is the
scale of operations of some major private or public enterprises. The very fact that some large
multinational firms, for instance, have annual turnover exceeding the budget expenditure of
developed national economies such as Belgium, or Italy in Europe and virtually all African
countries, suggests that the scale of coordination and control within a multinational enterprise
will be as complex as what exists at the level of co-ordination and control of economic activities
within some nation states (Todeva, 2005).
There is the need to examine the significant implicit and common understanding of some
concepts that derive mainly from agency theory. Major among these are transaction cost
economics and stakeholders’ theory.
The agency theory substantiates most of these arguments on efficient governance. Considering
that the corporation is a bundle of contracts, the contract between managers and shareholders
is not different from the contracts between the other agents involved in the value-adding
activities (employees, customers, suppliers). Investors as owners of stock in the stock market
capitalism, delegate decision-making powers to agents (managers and independent directors).
Ultimately, agency costs rise not only because of opportunistic behavior by managers, but also
from the monitoring and control mechanisms put in place by stock-holders (Awodun, 2018).
The entire corporate governance system, put in place to protect investors’ interest, represent
an institutionalization of monitoring and control procedures, raising costs, and diminishing
allocative efficiency (Otokiti, 2007) in most cases, particularly in public enterprises.
In mature market economies, where contract enforcement is undertaken by the state,
monitoring and control costs are shared between the MNE and state institutions. The costs of
corporate governance, however, remain at corporate level, reducing the value-added and the
wealth, created by the corporation. For MNEs operating in underdeveloped market economies,
risks from opportunistic behaviour at remote locations add additional agency costs that have
to be absorbed by the multinational, and hence multiple risk-sharing initiatives are undertaken,
all eroding the profits from these international operations.
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Awodun, M., & Adam, L. (2025). The Agency-Governance-Disruptions Model for Operational Efficiency, Profitability and Value Delivery: An Application
to Private and Public Enterprises in Nigeria. Archives of Business Research, 13(03). 171-190.
URL: http://doi.org/10.14738/abr.1303.18487
Hill and Jones (1992) summarise three sources of agency costs from the perspective of agency
theory as: (a) principal’s monitoring expenditure; (b) agents’ bonding expenditure; and (c)
residual loss.
CORPORATE GOVERNANCE AS A PRODUCT OF AGENCY THEORY
Corporate governance, the centerpiece of our model, is a product of the agency theory, and it
refers to a process of supervision and control over company management, involving a system
of external and internal checks and balances that ensures companies discharge their
responsibilities in an accountable manner to stakeholders (Tricker, 1984; Cannon, 1994;
Parkinson, 1994; Solomon and Solomon, 2004). It is a system/mechanism for allocation of
resources, control and co-ordination of economic activities at firm level that facilitates strategic
direction, accountability, transparency and wealth creation (Awodun, 2007; Otokiti, 2007).
Components of Corporate Governance
The first component of market-based corporate governance is ownership concentration, which
is defined by the number of large-block shareholders (i.e., mutual funds, pension funds and
trust funds), as well as by the proportion of shares they own. These institutional owners
become increasingly active in their demands that corporations adopt effective governance
mechanisms to control managerial decisions (Lorsch, 1989). Ownership concentration by a
small number of large-block shareholders can improve governance effectiveness because it
strengthens shareholders’ power when dealing with management (Mizruchi, 1983).
The higher the degree of ownership concentration, the more likely manager’s strategic
decisions will mesh with shareholder value maximization (Tihanyi et al., 2003). Moreover,
while company stock ownership can encourage wealth-maximization behaviour among
managers, Igbal and French (2007) argue that ownership allows entrenchment of managers
who own a large enough stake to reduce the possibility of their dismissal. This they referred to
as manager-entrenchment hypothesis.
Second, board composition, or the proportion of “inside” directors (executive directors) vs.
“outside” (non-executive directors), also has strong implications on corporate governance
because the board is essentially the “guardian” of the principal’s interest. Thus, many believe
that effective boards should be composed of greater proportions of outside directors (Mizruchi,
1983; and Borokhovich et al., 1996) because outside directors can make more exhaustive and
profound evaluations of strategic decisions and management behavior than inside directors
(Baysinger and Butler, 1985).
Market discipline is a third component of market-based corporate governance; it is an external
mechanism that becomes active when a firm’s internal controls fail, its performance is poor
and/or its management is ineffective. Market discipline may involve replacing incompetent
CEOs, other key executives and/or board members, or it can come in the form of a takeover
(especially hostile one) by another corporation. Under a hostile stakeholder, both key
executives and board members may be replaced by new management and new directors (Fama
and Jensen, 1983; Baysinger and Butler, 1985).
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Fourth, board chairmanship involves whether or not a firm’s CEO is also the board of directors’
chairperson. Where the influence of the CEO is strong on the board, whether as chairperson or
not, feelings of loyalty or responsibility towards the CEO may restrict the directors’ freedom
and independence to make difficult and contrary decisions (Singh and Harianto, 1989).
Fifth, board size is an important factor of market-based corporate governance since there are
drawbacks when boards are either too small or too large. There should be some sort of
moderation in sizing of board of directors.
Six, management remuneration as a market-based governance mechanism can be either
behavior-based or outcome-based (Eisenhardt, 1989). When managerial behaviors are well
understood, and evaluated, a behavior-based scheme is generally more appropriate. In such a
scenario, the agent receives a fixed wage for taking well-defined actions and penalizes him or
her for taking sub-optimal actions.
When managerial behaviors are not well-defined, outcome-based compensation plans that
reward the agent’s performance instead of actions are preferred. Despite differences in
compensation standards across countries, it is generally agreed that (1) executive
remuneration should reflect executive responsibilities; (2) remuneration should be reasonable
and comparable with market standards; and (3) incentive schemes should be clearly linked to
performance benchmarks (Tosi and Gomez-Mejia, 1989; Davis et al., 1997).
A seventh element in market-based corporate governance is a widely-used practice whereby
two or more companies exchange board members; this is known as interlocking directorate.
However, from the agency cost perspective, interlocking directorate may obstruct decision- making independence and transparency because under-performing managers who maintain
good personal ties with their interlocking partners may stay on their jobs (Zajac, 1988). Finally,
inbreeding is a practice whereby senior executives join the board after retiring from
management. This has its advantages and disadvantages on the organization, but the former
seems to outweigh the latter.
Market-based governance mechanisms are considered necessary, but instilling the right culture
to support corporate governance is more essential. Culture-based governance, which
comprises (1) governance culture and (2) corporate integrity, sets the moral tone for
governance and accountability.
Governance culture refers to the statements, visions, slogans, values, role models and social
rituals that are unique, to, and used by board members and key executives at both the first and
second tiers to engender corporate governance, transparency and accountability.
Corporate Accountability and Transparency
Corporate accountability is the extent to which a company is transparent in its corporate
activities and responsive to those it serves. Broadly, corporate accountability consists of (1)
financial reporting accountability and (2) strategic decision transparency (“strategic” from the
point of view of decisions that have significant effects or implications on the interests of
shareholders and other major stakeholders). Accountability is essentially a matter of
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Awodun, M., & Adam, L. (2025). The Agency-Governance-Disruptions Model for Operational Efficiency, Profitability and Value Delivery: An Application
to Private and Public Enterprises in Nigeria. Archives of Business Research, 13(03). 171-190.
URL: http://doi.org/10.14738/abr.1303.18487
disclosure, transparency, and of explaining corporate policies and actions to those to whom the
company is beholden (Wild, 1994; Shearer, 2002).
A firm should be accountable not only to shareholders, but also to all major stakeholders such
as regulators, customers, employees, creditors, suppliers and the local community (Shearer,
2002). A central requirement for corporate accountability is the firm’s ability to signal or
provide relevant information quickly, accurately and effectively to its shareholders,
stakeholders or other principal parties, such as regulators, who motivate and constrain the firm
to behave in both the principals’ and society’s best interests (Awodun, 2018).
Transparency about a company’s governance policies is a critical aspect of corporate
accountability. As long as investors, shareholders and other stakeholders have clear and
accessible information about these policies, the organization is considered transparent.
INNOVATION AND TECHNOLOGICAL DISRUPTIONS
What is seen as technological disruption today is considered as technological advancement at
the beginning and the turn of the 20th century. As technological improvements begin to take
place with efficiency introduced, as a result of those technological advancement, the obvious
potential loss of jobs to machines started to take place, and the perception of man about it all
began to change.
Advances in technology due to innovation has significantly cause changes in the ways that
production and service provisions and processes are carried out, to the extent that it disrupts
the already accepted standards. New ways of doing things, emerging rapidly, has therefore
become a race that enterprises have had to embark upon through research and development
to be the first, rather than the follower.
Several production processes have witnessed some significant disruptions, that even the firms
that are competing in the same sector cannot afford to ignore developments in their industries,
if they must remain relevant in their industry. It is with this background that the issue of
corporate governance and agency theory is being considered within the reality of the disruptive
nature of technological advancement globally.
Changes are taking place now at the speed of light. While a model of a product is being
introduced into the market, a new version is already undergoing development to replace the
newly introduce model. It is thus, a race that the management and the shareholders cannot but
take into consideration in their affairs, as responsibilities are contracted through the reality of
the agency theory.
THE AGENCY-GOVERNANCE-DISRUPTIONS MODEL
Following the review of the various concepts that are embedded in the model presented as
agency-governance-disruptions, it is essential to integrate these concepts and relate them to
operational efficiency, revenue generation/profitability and value delivery. Every organization,
be it private or public, desire to operate at some level of efficiency and add value to the society.
However, these mechanisms of governance, based on the agency theory, and the disruptive
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innovations that technology imposes, are not issues that could be taken for granted by any
organization, be it private or public.
The agency theory and the agency problems crave for solutions in corporate governance, hence
the view that agency theory promotes corporate governance, which is seen as a product of
agency theory. However, the disruptive role of technological innovations has come to have
some significant effects on the ability of corporate governance to deliver on the expectations of
the principal in relation to efficiency, revenue generation/profitability and value delivery.
We examine the effects of this tripod on the anticipated outcomes of firms, as we relate them to
different types of enterprises, private and public alike, in Nigeria, by narrowing our gage to the
universities as our representation of private and public enterprises.
In model 1 below, the relation and relevance of agency theory and corporate governance are
shown in the value delivery capacities of the enterprises, while the impact of the combination
of corporate governance and disruptions through technological innovations is shown through
operational efficiencies indices of the enterprises. On a final analysis, the effect of both agency
theory and technological disruptions is measured by our model on the revenue
generation/profitability index of the enterprises.
Model 1: Agency-governance-disruptions model for operational efficiency, profitability and
value delivery
Put succinctly, agency theory and corporate governance, as put forward by this model, are the
basis of value delivery by any enterprise. Also, corporate governance and technological
disruptions, in line with the model’s proposition, will determine the level of operational
efficiency of the enterprise. Finally, agency theory and technological disruptions, according to
our model, determines the ability of the enterprise to generate revenue that will lead to the
firm’s profitability. The agency-governance-disruptions model, as put forward in this paper, is
therefore an interlocking of the triangular components described above.
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The basis of our investigations in this study are; an examination of (1) the laws establishing the
universities, (2) the ownership and funding sources, (3) the governance structure as
entrenched in the laws, (4) the university’s compliance with the governance structure, (5) the
management operational capacities, (6) the stakeholders’ interests, (7) the revenue
generation/profitability, (8) operational efficiencies, and (9) value delivery.
Our findings are presented and analyzed in the section that follow.
PRESENTATION AND ANALYSIS OF FINDINGS
Out of a total of 120 copies of the questionnaire distributed equally and administered among
the six selected universities, only 112 copies (93%) were returned completed. 58 of the
completed questionnaire (52%) were from the private universities while the remaining 54
(48%) were completed and returned by the public universities. This questionnaire was
administered on members of the universities governing councils and management. The
responses were appropriately analyzed and presented in the tables (5.1 – 5.4) presented in this
paper.
As presented in table 5.1, the six universities (enterprises) have diverse ownership that
necessitated their classification into our private and public enterprises categories. While three
of these six universities are owned by private individuals/organizations, the other three are
owned by government, but at different tiers. What this means is that 50% of the enterprises
sampled are privately owned while the other 50% are publicly owned.
Table 5.1: Analysis of the Agency-Governance-Disruptions Model on Selected Private
and Public Universities in Nigeria
Type of
Enterprise
Ownership Governance
Structure
Agency
Problems
Technology
Disruptions
Operational
Efficiency
Profitability Value
Delivery
IFBU Private BoT/Council AS C. Friendly Efficient Profitable Good
CFBU Private BoT/Council AS C. Friendly Efficient Profitable Good
NFBU Private BoT/Council AS C. Friendly Efficient Profitable Good
FSOU Public MoE/Council MH C. Averse Inefficient Not for Profit Fair
SLOU Public MoE/Council MH C. Averse Inefficient Not for Profit Fair
FDOU Public MoE/Council MH C. Averse Inefficient Not for Profit Fair
Beyond the issue of ownership, which is a bit straight forward because it is easily determined.
Even at the point of approval by the licensing authority, there is the issue of corporate
governance, which is expected to be guided by the law establishing each of the institutions.
Without properly instituted governance structure, the permanent license of the any university
will not be issued.
However, for the corporate governance issues to be properly understood, the agency theory
aspect must be sorted. At the private universities level, their ownership representation is
through the institution of a Board of Trustees (BoT), in line with the law. This ownership
structure is empowered to approve and appoint a Governing Council to direct the affairs of the
university through policy formulation and enforcement of policy implementation by the
management.
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Awodun, M., & Adam, L. (2025). The Agency-Governance-Disruptions Model for Operational Efficiency, Profitability and Value Delivery: An Application
to Private and Public Enterprises in Nigeria. Archives of Business Research, 13(03). 171-190.
URL: http://doi.org/10.14738/abr.1303.18487
For the publicly owned institutions, however, the situation is a bit different, with the Ministry
of Education (MoE) holding forth on behalf of the government as owner of the universities. The
government, through the ministries (whether at the state or federal levels), therefore, appoints
the Governing Councils for the public universities, also in line with the laws establishing these
universities. The governance structure of both private and public universities thus appears to
reflect the representation of the interests of both the principals and agents appropriately as
expected.
The predominant agency problems in the private and public universities tend to be different.
While at the privately-owned universities, the dominant agency problem is that of averse
selection (AS), at the publicly-owned universities, on the other hand, the agency problem is that
of moral hazard (MH). In the former, the private ownership breathes down the throat of the
management and council, as they want to know all that happens, almost on a day to day basis,
even when they may not understand it, in some or most instances. The case of the latter is
however, different because the ownership and its representation tends not to know what is
happening at the various institutions because of poor reporting mechanisms, some claims of
autonomy and largely due to conflicting interests of representatives attributable to corruption.
When it comes to embracing technological changes/disruptions, particularly as it relates to
bringing about operational efficiency and revenue generation/profitability, the private
universities are easily adaptable and susceptible to change than the public universities. This,
however, cannot be generalized because of the simplicity and complexity of decision making in
private and public universities respectively. While it is very simple and easy to adopt changes
generally at the private universities, the situation is not the same for public universities because
of the complexities of interests.
This is why the mechanism of corporate governance should be appropriated in such a way that
it can help align the interests of the management and the shareholders, and thus alleviate the
negative impact of agency frictions. Recent empirical studies confirm the significance of
corporate governance in the growth process (see Nicolo et al. (2006), Bloom and Van Reenen
(2007), and Claessens and Yurtoglu (2012), among others. According to a report by OECD
(2012), it summarizes this body of evidence by arguing that “corporate governance exerts a
strong influence upon innovative activity and entrepreneurship. Better corporate governance,
therefore, should manifest itself in enhanced corporate performance, and can lead to higher
economic growth.”
Table 5.2: Analysis of the Agency-Governance-Disruptions Model and Agency Theory
Type of
Enterprise
Ownership
Interests
Management
Interests
Stakeholders
Interests
Employees
Interests
Moral
Hazard
Averse
Selection
Agency
Theory
IFBU High Low Low Low Negative Positive Significant
CFBU High Low Low Low Negative Positive Significant
NFBU High Low Low Low Negative Positive Significant
FSOU Low High High High Positive Negative Insignificant
SLOU Low High High High Positive Negative Insignificant
FDOU Low High High High Positive Negative Insignificant
Our findings as presented in table 5.2 show that there is high interest of ownership in the
private universities than what exist in the public universities. While the owners of these private
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day running of the enterprise. The adage that you cannot give what you do not have comes
clearly to bear here.
CONCLUSION AND RECOMMENDATIONS
In conclusion, the agency-governance-disruptions model reveals that when agency theory
properly aligns with corporate governance, it can reduce agency costs, improves strategic
decision making and implementation such that can lead to improved firm performance and
value delivery. The inherent agency problem, which is traditionally known as the principal- agent problem, is not only restricted to the principal and the agent but also extends to affecting
the value delivery capacity of the enterprise.
The separation of control and ownership in organizations causes different agency problems,
and a series of corporate governance mechanisms can be implemented to mitigate them. The
primary objective of institutionalizing corporate governance is to minimize the agency
problems and ensure that management problems are aligned with those of ownership (Saeid,
& Sakine 2015). This study affirms this position as all the respondents to our questionnaire in
the universities studied agrees with the significance of the alignment of agency theory and
corporate governance for organizational efficiency and effectiveness.
In the course of establishing that corporate governance provides the structure through which
the enterprise sets objectives, the strategy for attaining those objectives and the guidelines for
implementing and monitoring performance, this paper establishes that the agent’s utility
function (management) includes power, security, status, and wealth, while the principal’s
utility function (ownership) are principally to maximize value delivery, market value of their
shares, an ultimately, their wealth.
This study also establishes that agency costs rise not only because of opportunistic behavior of
management, but also from the monitoring and control mechanisms (governance structure)
put in place by stock-holders (ownership). Where there are proper monitoring and control
mechanism through the governance structure, the agency costs are lower, as was found in the
case of private universities.
We also discover that the higher the degree of ownership concentration and presence, the more
likely management’s ability to implement strategic decisions in line with shareholder value
maximization. This position is in line with earlier submissions of (Mizruchi, 1983; Baysinger
and Butler, 1985; Borokhovich et. al., 1996) who believe that effective boards should be
composed of greater proportions of outside directors on the premise that outside directors can
make more exhaustive and profound evaluations of strategic decisions and management
behavior than inside directors.
There are however, exceptions to this position as we uncovered in the cases of some of the
public enterprises. The reasons for these exceptions are tied to other interests, not in alignment
with owner’s interest but personal to the choices of representation that the ownership has put
on the board. Their ability to collude with management and put their unprofessional personal
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