Agency Theory : Relationship Between Agents And The Business Essay

1550 WordsNov 13, 20167 Pages
Manager Behavior Agency Theory is the relationship between agents in a business and the business principals. Agency theory is also concerned with undertaking problems that can exist in the agency relationships due to irregular goals or different aversion levels of risk. Enron, was the world’s largest energy company in 2001. Enron forerunner, Northern Gas Company was incorporated in Delaware on April 25, 1930. From this date through July 1985, Enron had hundreds of purchases and new sub-entity constructions when they acquired Houston Natural Gas Inc. (Kastantin, 2005). On April 10, 1986, the company changed its name to Enron Corporation. Enron was an interstate and intrastate natural gas pipeline company, then later in 1989 Enron started trading natural gas commodities (Sridharan, 2002). Enron became the largest natural gas mogul in the United Kingdom and the United States. Enron an energy company later became a risk management firm that was looking to trade from commodities to derivations and to have a large firm with few assets on its financial statements. The term allowed Enron to avoid risky trading operations and not to show their debt on the financial statements this term is Special Purpose Entities (SPE). The root cause of Enron is ‘asset-light’ strategy, SPEs, and off-balance-sheet financial that was Enron’s eventual failure (Sridharan, 2002). Andersen, which was Enron’s external/internal auditor, a consultant in non-audit and tax matter, that was approved to use
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