Agency theory as a driver of institutional change in accounting and reporting

Introduction. Agency conflict is one of the key factors contributing to the decline in business efficiency, as it stems from contradictions in the relationships between economic entities. The complexity and multivariate nature of doing business in modern economic conditions create a favourable environment for both the aggravation and transformation of conflicts between principals and agents at the micro level. When making decisions, these parties are not only driven by different goals and motivations but also possess varying levels of awareness regarding the object of management. Eliminating information asymmetry between participants in the agency conflict is a universal approach to its mitigation, which can be achieved by enhancing the transparency of the accounting and reporting system. Problem Statement. The expansion of the range of external stakeholders in financial reporting has initiated a continuous process of accounting reform, aimed at providing adequate responses in reporting to their constantly evolving information needs. Participants in the agency conflict represent a significant portion of the user audience for the information generated by the accounting and reporting system. The improvement of this system should take into account the need to reduce information asymmetry, thereby helping to ease tensions in the business environment. The purpose is to determine the prospects for the development of accounting and reporting institutions under the influence of transformations in principal-agent conflicts in the context of variable business conditions. Methods. The achievement of the set goal was ensured by the use of the following methods of scientific knowledge: logical-epistemological and behavioural approaches, generalization, induction and rational deduction, formalization, as well as the graphical method. Results. Based on the generalization of characteristic features of principal and agent behaviour models, the specific nature of agency conflicts in the business environment has been identified. Agency conflicts have been systematized within both the internal and external environments of the company, where management acts both as an agent and as a principal. Typical measures aimed at reducing the intensity of agency conflicts between economic actors have been analysed. The key advantage of minimizing information asymmetry between participants in agency conflicts lies in the universality of its implementation through the standardization of accounting and reporting, which is aimed at enhancing the transparency of information. The analysis of the composition and points of origin of agency costs supports the conclusion that the accounting system holds significant potential in terms of providing informational support for the management and optimization of such costs. Conclusions. Agency conflict may arise in any relationship between economic actors where the delegation of authority takes place. Its effective resolution depends on the timeliness of generating relevant information regarding implicit contracts and incentive mechanisms. Eliminating information asymmetry through the improvement of accounting and reporting tools can not only reduce the intensity of agency conflicts, but also enhance the efficiency of managing agency costs - especially when compared to traditional monitoring and control measures employed by principals to balance the elements of the agency relationship system.