Exploring the extent and nature of principal-agent theory in charitable organisations

  • Thomas Neal

Student thesis: Doctoral Thesis

Abstract

The non-profit sector is seeing increased attention in academic accounting literature. Recent papers have sought to examine the relevance of principal-agent theory to the sector, in contrast to its more traditional, for-profit context. Here, this dialogue is continued with an examination of principal-agent theory in Scottish charitable organisations. Agency, stewardship and stakeholder theories, together with social entrepreneurship and entrepreneurial orientation are examined, in order to gain greater understanding of charitable organisations.This study is comprised of two interview stages held with representatives from traditional charities. The first, unstructured stage, along with the literature review, serves to determine the key issues facing the sector. From this, four research questions are outlined. These research questions are considered in relation to the second, semi-structured interview stage. The developed research questions address the balancing of social and financial objectives, charity accountability, the extent and nature of social entrepreneurship and the usefulness of entrepreneurial thinking.The subsequent analysis takes four separate ‘components’ of principal-agent theory and social entrepreneurship, each corresponding to one of the four developed research questions. The analysis from this research finds conflicting evidence relating to the relevance, or importance, of agency and stewardship towards social entrepreneurship. Key concepts of social entrepreneurship, including risk, innovation and personal ambition, are found to be strengths of agency orientated individuals. By contrast, blended value and a heightened sense of accountability are found to be strengths of stewardship orientated individuals. This study takes inspiration from this previous research in order to develop a unique analytical framework that incorporates a number of existing concepts and theories. The conclusion that can be drawn from is that principal-agent theory can offer insight into the charity sector and can act as a facilitating framework through which we can examine the individuals and relationships that exist.
Date of Award3 May 2019
Original languageEnglish
Awarding Institution
  • University Of Strathclyde
SupervisorJulia Smith (Supervisor) & Christine Cooper (Supervisor)

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