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Review Article
Agency Costs in the Context of Financial Markets: Concept, Types, and Economic Consequences: A Literature Review
Alaa Kafa*
Issue:
Volume 13, Issue 6, December 2025
Pages:
236-243
Received:
24 September 2025
Accepted:
7 October 2025
Published:
3 December 2025
Abstract: This literature review aims to scrutinize and elucidate the intricate theoretical and applied framework surrounding the pervasive issue of agency costs, specifically within the dynamic milieu of financial markets. The analysis delves into the foundational concept of agency costs, meticulously examining their distinct typologies, their multifaceted interpretation by market participants, and their profound economic ramifications. The genesis of this principal-agent problem is inextricably linked to the defining characteristic of the modern corporation: the separation of ownership from control. This fundamental division creates a inherent conflict of interest, wherein management (the agent) may prioritize personal goals-such as excessive perquisite consumption, empire building, or shirking-over the paramount objective of maximizing shareholder wealth (the principal). This divergence is critically intensified by pervasive information asymmetry, where managers inherently possess superior knowledge about the firm's true performance and prospects compared to dispersed owners. The theoretical underpinnings of this study are firmly rooted in the seminal contributions of Berle and Means, who first identified the implications of separated ownership and control, and Jensen and Meckling, who formally defined agency costs. The review systematically identifies and categorizes the principal manifestations of agency costs, framing them according to their association with the specific behavioral incentives and cultural-institutional characteristics of both the contracting parties and their broader economic environment. Two predominant patterns are rigorously delineated: first, the classical vertical conflict between corporate management and all shareholders, and second, the horizontal conflict between controlling shareholders (who often exert significant influence over management) and minority shareholders, who are vulnerable to expropriation through tunneling or unfair related-party transactions. For each archetype, the synthesis critically analyzes the empirical findings of previous scholarly work concerning their distinct economic consequences, which range from direct wealth transfers and suboptimal investment decisions to broader macroeconomic impacts like reduced market efficiency and impeded capital formation. Furthermore, the review proactively explores unresolved research particularly in the context of evolving market structures, regulatory landscapes, and global corporate governance norms.
Abstract: This literature review aims to scrutinize and elucidate the intricate theoretical and applied framework surrounding the pervasive issue of agency costs, specifically within the dynamic milieu of financial markets. The analysis delves into the foundational concept of agency costs, meticulously examining their distinct typologies, their multifaceted ...
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Research Article
Monitoring and Evaluation Communication, Organizational Culture and Performance: An Empirical Analysis of Microfinance Institutions in Kenya
Charles Mallans Rambo*
Issue:
Volume 13, Issue 6, December 2025
Pages:
244-259
Received:
26 October 2025
Accepted:
10 November 2025
Published:
9 December 2025
Abstract: Microfinance Institutions (MFIs) are essential for boosting Small and Medium Enterprise (SME) projects through affordable credit services. Monitoring and evaluation (M&E) communication, as well as organizational culture are key functions that enable MFIs to improve financial services and performance. However, relationship between M&E communication, organizational culture and performance of MFIs remains under-investigated in the academia, limiting the potential of MFI financial services to SMEs. This study sought to determine the influence of M&E communication on the performance of MFIs financing SMEs in Kenya; as well as establish the moderating effect of organizational culture on the relationship. The cross-sectional survey design with mixed methods was used, and primary data obtained from 354 respondents, including 36 MFI managers, 144 departmental heads, and 174 entrepreneurs. Analysis techniques included descriptive, correlation co-efficient (rs), simple and multiple linear regression (with interaction term) for quantitative data; and thematic analysis for qualitative data. Key results show that M&E communication had an average positive and significant influence on performance of MFIs (Beta = 0.477, t = 10.254 & ρ-value = 0.009). Organizational culture strengthened the relationship between M&E communication and performance of MFIs by 9.3% and its effect was significant. The study concludes that M&E communication significantly enhances MFI performance, with organizational culture strengthening this relationship by turning information into actionable insights. It underscores the need for MFIs to implement comprehensive M&E communication frameworks that prioritize clarity, inclusivity, and timeliness, and tailor communication channels and language to stakeholders’ needs and contexts. The study further calls for regular staff training to enhance learning and performance, a culture of openness, collaboration, and accountability to support effective use of M&E findings.
Abstract: Microfinance Institutions (MFIs) are essential for boosting Small and Medium Enterprise (SME) projects through affordable credit services. Monitoring and evaluation (M&E) communication, as well as organizational culture are key functions that enable MFIs to improve financial services and performance. However, relationship between M&E communication,...
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Research Article
Intellectual Capital and Its Impact on the Financial Performance: Evidence from Palestine
Doaa Abed Alhafiz,
Akram Rahhal*
Issue:
Volume 13, Issue 6, December 2025
Pages:
260-268
Received:
31 October 2025
Accepted:
14 November 2025
Published:
11 December 2025
DOI:
10.11648/j.jfa.20251306.13
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Abstract: The study aimed to explore the impact of intellectual capital on the financial performance of corporations listed on the Palestine Exchange. The analytical approach was used in this study to examine the financial statements of these corporations during the period from 2017 to 2022. Data was collected from the annual financial reports of the listed companies. The study population consist of all 43 companies listed on the Palestine Exchange which regularly disclosed their financial and sustainability reports, distributed across various economic sectors. Data extracted from the financial statements was processed using the statistical package program SPSS, using multiple regression analysis to examine the impact of intellectual capital in its three dimensions: human capital, structural capital, and relational capital, on financial performance indicators represented by return on assets, return on equity, and net profit ratio. A clear relationship was found between the components of intellectual capital and the financial performance of public shareholding companies on the Palestine Exchange. It was also found that intellectual capital, in its various dimensions, has a significant impact on return on assets, return on equity, and net profit margin. Intellectual capital in the banking sector had the greatest impact on financial performance compared to other sectors.
Abstract: The study aimed to explore the impact of intellectual capital on the financial performance of corporations listed on the Palestine Exchange. The analytical approach was used in this study to examine the financial statements of these corporations during the period from 2017 to 2022. Data was collected from the annual financial reports of the listed ...
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