Optimizing School Budgets: A Systematic Review of Principal-Agent Theory's Effectiveness in Educational Governance and Resource Allocation (2019–2025)

Abstract

This review examines the effectiveness of Principal-Agent Theory (PAT) in enhancing school budgets through educational governance and resource allocation in the Philippines and other countries between 2019 and 2025. It examines how PAT closes information gaps, aligns incentives, and reduces agency costs, particularly in the Department of Education, to enhance the efficiency of resource allocation. Evidence from local and international studies shows that PAT helps enhance accountability and optimize budgets in various educational environments. By viewing administrators as agents and governing bodies as principals, PAT provides a solid framework for strategic resource management. The review confirms that PAT helps ensure effective budget allocation and gives policymakers in the Philippines and elsewhere practical insights.