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From what i had learned, transaction cost theory are the cost involved when principals appoints agents. which consist of hiring cost, contractual arrangement costs, compliance costs to control agent’s activities, and conflict of interest between directors and shareholders.
Overall, transaction cost theory are all the cost incurred to bring the directors to work in the company and costs incur as a result of monitoring directors’s actions
However, i don’t know how to link with corporate governance issue.
what is the impact of transaction cost theory in corporate governance??can someone help me to answer this question??
I think you maybe confused between transaction cost theory, which is any cost involved in partaking in an economic transaction, and agency cost, which is the costs involved in having directors as agents for the shareholders, And the cost to the company in making sure they perform in the shareholder interest. To ensure the company achieves its objective of profit maximisation, it needs to be managed by agents that act in its interests, who will require remuneration for their efforts
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