REDUCING AGENCY COSTS BY SELECTING AN APPROPRIATE SYSTEM OF CORPORATE GOVERNANCE

This paper analyzes the Principal-Agent Problem in Corporate Governance. Focus is on the question: One-Tier or Two-Tier system of Corporate Governance – which one is more effective in reducing Agency Costs? The authors analyze provisions regulating corporate governance in different legal systems, and therefore, they conclude: It should be prescribed by Codes of Corporate Governance that system of corporete governance applied in particular company shall depend on its shareholding structure. Consequently, significant indication for potential investors to not invest in the company, would exist if the best practice of corperate governance (including the system of Corporate Governance recommended by CCG) is not applied