The relationship between favoritism and agency costs within the context of agency theory

The separation between company ownership and management became apparent in parallel with the industrial revolution and the developments following it, with the delegation of authority becoming widespread, and company owners delegating their management rights to managers they had formed agency relationships with. However, various agency problems appeared as the parties within the agency relationship had different goals and objectives. At this point, all activities and expenses undertaken with the aim of solving the agency problems created by the separation of company ownership and management, and uniting the interests of managers and company owners under one common denominator, resulted in the generation of agency costs. Company owners and managers may tend towards applications of favoritism, which cause opportunism fears to be eliminated by assuming important functions in the establishment of the "feeling of trust" through the reduction of the asymmetry of information, and be an important factor in the realization of significant reductions in agency costs, by reconciling these interests, in order to resolve these problems. Within this context, the phenomenon of agency theory and favoritism has been explained in the first section of the study, entitled basic concepts. The relationship between these two concepts has been set out, and the impacts of the said relationships on agency theory have been examined in the second section. In the third and final section, the data obtained from the surveys carried out with one hundred and two middle and senior managers employed at forty-seven five star accommodation facilities in Beldibi, Belek and Kadriye, in Antalya, have been analyzed and interpreted within the framework of the SPSS 17 package program. Keywords: Agency Theory, Agency Costs, Favoritism