The Role of Artificial Intelligence in Reducing Agency Costs and Improving Corporate Governance Efficiency: An Analytical Study
DOI:
https://doi.org/10.59992/IJFAES.2026.v5n10p5Keywords:
Artificial Intelligence, Agency Theory, Agency Costs, Monitoring Costs, Bonding Costs, Residual Loss, Institutional Control, Corporate GovernanceAbstract
This study aimed to analyze the role of artificial intelligence in reducing agency costs and improving the efficiency of institutional control, considering the rapid developments in the adoption of artificial intelligence technologies in auditing, control management risk, and corporate governance. The study addressed a research problem arising from the limited theoretical foundation and the scarcity of Arabic literature and research examining the relationship between artificial intelligence applications and agency costs, particularly their three dimensions: monitoring costs, bonding costs, and residual loss. The study adopted a descriptive-analytical approach and an inductive analytical approach by reviewing and analyzing relevant literature, previous studies, and specialized reports published during the period 2020–2026.
The study concluded that artificial intelligence could contribute to the reducing of agency costs by enhancing continuous monitoring, improving the quality and timeliness of information, reducing information asymmetry, supporting decision-making, and enabling the early detection of errors, fraud, and managerial deviations. The findings also indicated that artificial intelligence applications in auditing, control, and risk management facilitate a shift from ex post control to proactive and intelligent control, thereby enhancing institutional control efficiency, supporting risk prediction, activating early-warning systems, and promoting more efficient use of resources. Furthermore, artificial intelligence can strengthen governance, accountability, and compliance and contribute to limiting managerial opportunism. However, its use also creates new challenges related to data protection, algorithmic bias, transparency, legal responsibility, and overreliance on intelligent systems. The study concluded that realizing the full benefits of artificial intelligence requires an integrated digital governance framework that balances automation with human oversight and ensures transparency, accountability, and data protection.
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