Financial Crisis
1 Introduction
The latest global financial crisis was exploded in 2008. This was the most serious financial crisis since the economic depression which occurred in 1930s and it severely impacted the global financial market. Lots of corporations collapsed during the 2008 financial recession which was caused by breakage of capital chain. Although some companies did not bankrupt during that period, they also had suffered huge loss.
The 2008 global financial crisis began from America. American financial crisis came from the prosperity of real estate. Before the 2008 global financial crisis, a large number of financial derivatives were generated and financial bubble became more and more serious. Finally, American sub-prime crisis occurred which leaded to a large number of bank failure. This paper will analyze the reason of American sub-prime crisis and indicate the relevance between Ghoshal 's article, agency theory and the 2008 global financial crisis. This essay will argue that agency theory contributes to the 2008 global financial recession.
2 Review of the literature
2.1 Agency theory
Agency theory has described a relationship between principals and agents. It also can solve this relationship through a contract that 'one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent ' (Jensen and Meckling, 1976:308, citied in Luhman and Cunliffe, 2013).
2.2 Bad theory and human 's morality and ethic
After the collapse of Enron, Ghoshal (2005) strongly argues that business school does not need to do lots of things. In contrast, they just need to terminate some old courses which they are teaching for their students. The reason is that the root of the issues in management practices can be found in the theories of management. Additionally, management practices which are condemned are enhanced by these 'theories and ideas '
The latest global financial crisis was exploded in 2008. This was the most serious financial crisis since the economic depression which occurred in 1930s and it severely impacted the global financial market. Lots of corporations collapsed during the 2008 financial recession which was caused by breakage of capital chain. Although some companies did not bankrupt during that period, they also had suffered huge loss.
The 2008 global financial crisis began from America. American financial crisis came from the prosperity of real estate. Before the 2008 global financial crisis, a large number of financial derivatives were generated and financial bubble became more and more serious. Finally, American sub-prime crisis occurred which leaded to a large number of bank failure. This paper will analyze the reason of American sub-prime crisis and indicate the relevance between Ghoshal 's article, agency theory and the 2008 global financial crisis. This essay will argue that agency theory contributes to the 2008 global financial recession.
2 Review of the literature
2.1 Agency theory
Agency theory has described a relationship between principals and agents. It also can solve this relationship through a contract that 'one or more persons (the principal(s)) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent ' (Jensen and Meckling, 1976:308, citied in Luhman and Cunliffe, 2013).
2.2 Bad theory and human 's morality and ethic
After the collapse of Enron, Ghoshal (2005) strongly argues that business school does not need to do lots of things. In contrast, they just need to terminate some old courses which they are teaching for their students. The reason is that the root of the issues in management practices can be found in the theories of management. Additionally, management practices which are condemned are enhanced by these 'theories and ideas '