A »Agency theory in corporate finance explores the relationship between principals (shareholders) and agents (company executives). It highlights conflicts arising from differing goals, such as executives prioritizing personal gains over shareholder interests. For instance, a CEO may focus on short-term profits to increase bonuses, risking long-term company stability. Effective governance, incentives, and monitoring can align both parties' interests, minimizing agency problems and ensuring better financial performance.

A »Agency theory in corporate finance examines the relationship between principals (shareholders) and agents (managers), highlighting potential conflicts of interest. It addresses issues arising when agents prioritize their own interests over those of principals, and proposes mechanisms to align their interests and mitigate agency costs.