30 Pages Posted: 29 Nov 1998
Social and economic activities, like religion, entertainment, education, research, and the production of other goods and services, are carried on by different types of organizations, for example, corporations, proprietorships, partnerships, mutuals and nonprofits. There is competition among organizational forms for survival. The form of organization that survives in an activity is the one that delivers the product demanded by customers at the lowest price while covering costs.
The characteristics of residual claims are important both in distinguishing organizations from one another and in explaining the survival of organizational forms in specific activities. This paper develops a set of propositions that explain the special features of the residual claims of different organizational forms as efficient approaches to controlling agency problems.
JEL Classification: G32
Suggested Citation: Suggested Citation
Fama, Eugene F. and Jensen, Michael C., Agency Problems and Residual Claims. Michael C. Jensen, FOUNDATIONS OF ORGANIZATIONAL STRATEGY, Harvard University Press, 1998; Journal of Law & Economics, Vol. 26, June 1983. Available at SSRN: https://ssrn.com/abstract=94032 or http://dx.doi.org/10.2139/ssrn.94032
By Eugene Fama