By the end of this course, I expect the student to be able to
- Detect (potential) principal-agent problems when sufficient context about the particular situation is given.
- Design a management control system that addresses the detected principal-agent problems.
- Predict potential drawbacks of a particular management control system (i.e. can the implementation of a management control system in itself induce principal-agent problems rather than reducing principal-agent problems).
- Discuss the psychological and economic theories used in the papers.
- Apply the psychological and economic theories to a practical situation
- Master professional skills such as writing, discussing, and asking the right questions
Overall, the course is managerial-oriented and aims to improve your skills to detect and solve principal-agent problems. We will increase your skills in this area through reading academic articles. Please note that the research method and econometric details of the papers we cover are not the core of this course. That said, to get the maximum out of this course, it is important that you have a basic understanding of research methodology and statistics.
To maximize firm performance, employees should be motivated to act in the best interest of the firm. For several reasons, employees do not always act in the best interest of the firm. A situation in which an employee is not acting in the best interest of the firm is often described as a ‘principal-agent problem’. After characterizing the ‘principal-agent problem’, we will discuss what firms can do to mitigate the ‘principal-agent problem’, or, in other words, to motivate employees to act in the best interest of the firm. Although we kick off the course with the ‘traditional’ ways in which a firm can address ‘principal-agent problems’, such as performance measures, we will also cover ‘more modern’ mechanisms, such as leadership and social norms. To improve your understanding of how firms can mitigate the principal-agent problem, we will discuss well-developed theories from economics and psychology and apply these theories to practical situations that you will run into when starting your career (or that you already have run into as a student-employee). |
By the end of the course, you should have developed a toolkit that should enable you to advice firms on (1) the principal-agent problems that are present in their firms and (2) how managers can address the principal-agent problem and improve the performance of their employees and the firm as a whole. Overall, this course is useful for everyone who wants to make a career as a consultant, controller, auditor and for everyone who wants to take up a leadership position in the future. This course also wants you to prepare for a future career in business by paying attention to several skills each of which are an important determinant of success in business: the skill to link a text to your own world, the skill to ask the right questions, and writing skills.
Type of instructions
interactive lectures of 2 hours during which the theories are applied on practical situations
Type of exams
final written exam (60%) and assignment (40%)
students need to obtain a 5 (unrounded) for the final written exam to pass the course
The required readings consist of published papers in accounting, economics, and psychology. The papers can be downloaded via the library (for published papers) or will be made available via Blackboard (for working papers).