Agency Theory: Its Relevance to Tanzania's Economic Restructuring

Abstract

Tanzania's current restructuring programme entails not only private ownership but also a dispersion of ownership of companies to a wider public of private entrepreneurs. This paper uses agency theory to examine the contractual relationships between various parties in these privatized companies. An exposition of agency problem and costs is made and ways to reduce them are suggested and analyzed. The relevance of the theory to the restructuring programme is also examined. The paper analyses how privatization is going to define the agency relationships, thereby enabling the application to agency theory in the operations of these companies. This will mutually benefit both investors and management in these companies by providing investment opportunities and cheaper sources of capital respectively.


African Journal of Finance and Management Vol.9(1) 2000: 78-88