This paper is a theoretical introduction to modern governance of universities in developing countries. Indeed, adopting the approach of the paradigm of the theory of incentives Laffont and Tirole (1993), this paper discusses the effects of the presence of information asymmetry between the State and the university. The State, through taxation is responsible for funding education. We show that presence of asymmetric information between the state and a representative university generates a sub-optimal allocation. Indeed, the situation of private information on all relevant variables naturally creates a situation of rent for university. Therefore, given the cost of public funds and in order to reduce the rent of public universities the state is led to create strategic distortion that actually lead to limit the rent, which results in terms of allocation to a second-best solution associated to a decline in performance of university.