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Theories of corruption: conceptual explanations in finance framework

Jurnal Keuangan dan Perbankan, Volume 4 Nomor 1 April 2006
Journal from JIPTUNMERPP / 2011-12-23 02:04:59
Oleh : Reikman Aritonang , Diploma 3 of Finance and Banking Merdeka University Malang (jurkubank@yahoo.com)
Dibuat : 2006-04-01, dengan file

Keyword : Corruption, agency theory, contracting, transaction theory

This paper examines theoretical rationales to explain corruption using finance approach. The branches of theoretical rationale include transaction theory, contracting theory, moral hazard theory, and a principal-agent theory. Theoretical models are developed to provide argument for each theory. The transaction theory describes that transaction costs associated with wasted funds represents the corruption. A transparent principle is a required to prevent the wasted funds. The agency theory shows the existence of three parties in an agency model. Conflict of interest arises between principal and supervisor or between principal and agent in which each party maximizes their utility. The moral hazard theory works out in the principal-agent framework and the agent can choose between two actions: corrupt and non-corrupt. The agentÂ’s utility moral hazard depends on the option that collusion may take place. The contracting theory focuses on contracts between a principal and a privately informed agent. The principal my employ a supervisor who can obtain information about the agent at lower costs than the principal. The optimal contract thus maximizes the principalÂ’s pay-off by explicitly considering the possibility of side-contracting between the supervisor and the agent. The models provide opportunity to analyze the impact of corruption in finance context.

Deskripsi Alternatif :

This paper examines theoretical rationales to explain corruption using finance approach. The branches of theoretical rationale include transaction theory, contracting theory, moral hazard theory, and a principal-agent theory. Theoretical models are developed to provide argument for each theory. The transaction theory describes that transaction costs associated with wasted funds represents the corruption. A transparent principle is a required to prevent the wasted funds. The agency theory shows the existence of three parties in an agency model. Conflict of interest arises between principal and supervisor or between principal and agent in which each party maximizes their utility. The moral hazard theory works out in the principal-agent framework and the agent can choose between two actions: corrupt and non-corrupt. The agentÂ’s utility moral hazard depends on the option that collusion may take place. The contracting theory focuses on contracts between a principal and a privately informed agent. The principal my employ a supervisor who can obtain information about the agent at lower costs than the principal. The optimal contract thus maximizes the principalÂ’s pay-off by explicitly considering the possibility of side-contracting between the supervisor and the agent. The models provide opportunity to analyze the impact of corruption in finance context.

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PropertiNilai Properti
ID PublisherJIPTUNMERPP
OrganisasiD
Nama KontakDra. Wiwik Supriyanti, SS
AlamatJl. Terusan Halimun 11 B
KotaMalang
DaerahJawa Timur
NegaraIndonesia
Telepon0341-563504
Fax0341-563504
E-mail Administratorperpus@unmer.ac.id
E-mail CKOwsupriyanti@yahoo.com

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  • Editor: Wiwik Supriyanti, Dra. SS.