Journal of Business & Financial Affairs

By-product Extraction of a Rationality-based Agency Conflict Index from Selected Credit Unions in Kenya: Introducing the Agency Conflict Discriminant

Abstract

Stanley K Kirika

For ages, there has not been a mathematical model that measures agency conflict. While all and sundry agree that there may not exist business activities without the concept of agency, little on development of a standard measure of the same has been achieved. This study attempts to develop a quantitative model for agency conflict measurement by utilizing entropy-q rationality model using data from select credit unions in Kenya. Analysis of 47 members and 14 management staff of Stima credit union, 133 members and 16 management staff of Unitas credit union, and 91 members and 16 management staff of Mwalimu National credit union showed overall existence of agency conflict as indicated by the negative value of the rationality difference. The conflict was more severe in Mwalimu National credit union. However, Stima credit union posted a positive agency conflict of 20.64%; on which basis, the regulator may set an appropriate index for the sector financial performance monitoring.