Harmonising Agency Theory and Sustainable Economic Paradigm – Improving Market Efficiency by Smart Regulation

Abstract

We examined the intricate dynamics of agency theory within the framework of sustainable economic transition, which is incredibly capital intensive. Recognizing the gravity of sustainable transition, we address the challenges posed by the Second Order Agency Problem (SOAP) and market failures related to public goods. The research explores the subtle shift towards dominant credence goods and services, emphasizing the need for standardized non-financial information fuelling market’s efficiency. The primary aim is to bridge the gap between classical agency theory and modern sustainable economics applications. Our findings introduce an innovative Regulation Curve Model (RCM) presenting a fresh perspective on the cost-benefit dynamics of regulation. This study’s scope is international, with a specific focus on case studies from Poland and Slovenia. Our results from the RCM concept and from the sustainable strategy scoring model offer significant cognitive value for both academic science and practical policymaking. The research holds potential for guiding future sustainable policies and offers insights for nations navigating the complexities of economic transition.