Journal articles: 'Equity Agency Costs'

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Sackley, William H. "Agency Costs of Overvalued Equity." CFA Digest 35, no. 4 (November 2005): 91. http://dx.doi.org/10.2469/dig.v35.n4.1790.

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Pantzalis, Christos, and Jung Chul Park. "Agency Costs and Equity Mispricing." Asia-Pacific Journal of Financial Studies 43, no. 1 (February 2014): 89–123. http://dx.doi.org/10.1111/ajfs.12041.

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Jensen, Michael C. "Agency Costs of Overvalued Equity." Financial Management 34, no. 1 (March 2005): 5–19. http://dx.doi.org/10.1111/j.1755-053x.2005.tb00090.x.

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Aarstol, Michael. "Inflation, agency costs, and equity returns." Journal of Economics and Business 52, no. 5 (September 2000): 387–403. http://dx.doi.org/10.1016/s0148-6195(00)00030-8.

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McMahon, Richard G. P. "Equity Agency Costs Amongst Manufacturing SMEs." Small Business Economics 22, no. 2 (March 2004): 121–40. http://dx.doi.org/10.1023/b:sbej.0000014452.12852.3f.

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Liu, Chia-Ying, Shiu-Chen Huang, and Shieh-Liang Chen. "The Effects of Agency Costs and Insiders’ Shareholdings on Financing Choices." Asian Journal of Finance & Accounting 8, no. 1 (April 16, 2016): 127. http://dx.doi.org/10.5296/ajfa.v8i1.9288.

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This paper investigates the effects of debt agency cost and equity agency cost of current and prior periods on the financing choices of long-term debts, seasoned equity offering, and private equity financings. It also examines the effects of the shareholdings of insiders on the association between both debt and equity agency costs and the choice of financing methods. The findings show that both prior and current debt agency costs are positively related to seasoned equity offerings of current period, and both prior and current debt agency costs are positively related to private equity financing of current period regardless of whether the models consider the factor of insiders’ shareholdings. As for equity agency cost, the document indicate that both current and prior equity agency costs are negatively related to current seasoned equity offerings, however, only prior equity agency costs are negatively related to current seasoned equity offerings under considering shareholdings of insiders. Moreover, the shareholdings of insiders would affect the positive association between the corporate debt agency cost and seasoned equity offerings and the positive association between the corporate equity agency cost and debt financing.

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Nobanee, Haitham, and Jaya Abraham. "The impact of free cash flow, equity concentration and agency costs on firm’s profitability." Investment Management and Financial Innovations 14, no. 2 (June 1, 2017): 19–26. http://dx.doi.org/10.21511/imfi.14(2).2017.02.

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This paper examines how free cash flow and equity concentration are associated with agency costs, and how they influence the profitability of insurance firms listed on the Saudi Stock Market. The results indicate that equity concentration has no significant impact on agency costs, free cash flow has no significant impact on agency costs and agency costs have no significant impact on firm’s profitability. The findings of this study do not show any evidence to support the agency theory among insurance firms listed on the Saudi Stock Market.

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Kontuš, Eleonora. "Agency costs, capital structure and corporate performance." Ekonomski vjesnik 34, no. 1 (2021): 73–85. http://dx.doi.org/10.51680/ev.34.1.6.

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Purpose: The aim of this study is, first to describe and explore equity agency costs; second, to explore the impact of capital structure on equity agency costs; and finally, to examine the impact of agency costs on the performance of listed companies. Methodology: Panel data regression has been used for research data analysis. Results: The results of the work show that equity to capital and long-term debt to capital variables have a positive and significant impact on the agency costs of listed companies in the Republic of Croatia. The study indicates that long-term debt to capital variable has a negative and significant impact on the agency costs of listed companies in Slovenia and the Czech Republic. Furthermore, we find evidence to suggest that changes in agency costs have little or no effect on the performance of listed companies in Croatia, Slovenia and the Czech Republic. The findings suggest that the capital structure decisions affect the agency costs of listed companies and the agency costs may affect corporate performance. Conclusion: This study makes a number of contributions to the agency costs literature. It presents the first study of agency costs of listed companies in Croatia, Slovenia and the Czech Republic that uses panel data, a technique that enables us to isolate both cross section and time series effects. The present paper can help managers to better understand equity agency costs and their effects on corporate performance.

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Nobanee, Haitham, Nejla Ould Daoud Ellili, and Jaya Abraham. "Equity Concentration, Agency Costs and Performance of Non-financial Firms Listed on the Saudi Stock Exchange (Tadawul)." Global Business Review 18, no. 2 (March 9, 2017): 379–87. http://dx.doi.org/10.1177/0972150916668606.

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This article examines the association between the equity concentration and agency costs as well as the impact of agency costs on performance of non-financial firms listed on the Saudi Stock Exchange (Tadawul). These relations are examined by using dynamic panel data and a two-step robust system estimation for the period 2010–2013. The study uses three proxy variables to measure agency costs. The results show that the equity concentration has no significant impact on agency costs, and the agency costs have no significant impact on firms’ performance. In addition, the study shows no evidence to support the agency theory in non-financial firms listed on the Saudi Stock Exchange (Tadawul). This study provides a better understanding of the association between equity concentration, agency costs and a firm’s performance.

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Meuleman, Miguel, Mike Wright, Sophie Manigart, and Andy Lockett. "Private Equity Syndication: Agency Costs, Reputation and Collaboration." Journal of Business Finance & Accounting 36, no. 5-6 (June 2009): 616–44. http://dx.doi.org/10.1111/j.1468-5957.2009.02124.x.

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Baldwin, Adam. "Private Equity and Agency Costs: an Economic Analysis." Economic Affairs 32, no. 3 (October 2012): 107–9. http://dx.doi.org/10.1111/j.1468-0270.2012.02183.x.

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Krishnaswamy, C. R. "An analysis of the performance of private equity: Agency cost approach." Corporate Ownership and Control 6, no. 3 (2009): 424–28. http://dx.doi.org/10.22495/cocv6i3c4p1.

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In this paper, we explore the effects of agency costs on the performance of private equity. We discuss why private equity firms generally have much lower agency costs. We show using Capital Asset Pricing Model approach that private equity funds would be better off by investing in firms with low beta than high beta firms.

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Hwang, LeeSeok, and Yong O. Kim. "Does the Ownership Structure of Debt and Equity Affect the Agency Costs of Debt? Japanese Evidence." Journal of Accounting, Auditing & Finance 13, no. 1 (January 1998): 37–66. http://dx.doi.org/10.1177/0148558x9801300103.

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This paper examines the effect of the ownership structure (of debt and equity) on the agency problems of debt. This issue is particularly relevant for Japanese keiretsu firms. Member firms in a keiretsu are linked through business ties and reciprocal shareholdings. A central figure of the keiretsu is the main bank that serves as a corporate monitor. We hypothesize that the main bank's monitoring intensity varies with the degree of its keiretsu member banks' financial interests in the member firms. We first find that the leverage of keiretsu firms in our sample is significantly negatively related to proxies for the source of potential agency conflicts (e.g., R&D expenditures and intangible assets), implying that Japanese keiretsu firms also suffer from agency problems of debt. This is contrary to the popularly held view that Japanese firms are free of agency problems of debt since banks are often both large creditors and shareholders. We then consider the ownership structures based on debt and equity holdings by member banks and member firms within the same keiretsu. Consistent with our hypothesis, our empirical results show that agency costs of debt are pronounced among firms in which the members have low-debt and low-equity holdings, but are mitigated substantially for other firms in which the members have significant holdings of debt and/or equity, in the order of low debt and high equity, high debt and low equity, high debt and high equity.

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Jelinek, Kate, and Pamela S. Stuerke. "The nonlinear relation between agency costs and managerial equity ownership." International Journal of Managerial Finance 5, no. 2 (April 3, 2009): 156–78. http://dx.doi.org/10.1108/17439130910947886.

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Balachandran, Balasingham, Sutharson Kanapathippillai, Chandrasekhar Krishnamurti, Michael Theobald, and Eswaran Velayutham. "The issuance of warrants in rights offerings: Agency costs and signaling effects." Australian Journal of Management 42, no. 4 (March 13, 2017): 608–36. http://dx.doi.org/10.1177/0312896216682062.

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We examine the issuance choice across rights issues of equity, unit offerings, and standalone warrants and investigate the market reactions to these issue types. We find that agency costs, growth opportunities, and current funding needs relative to assets in place are prime drivers of the type of equity issuance choice. Managers use quality signals such as underpricing, underwriting status, and the proportion of funds raised by exercising warrants in determining the features of the warrant issue. Furthermore, we document that the market reacts more favorably to standalone warrants issues than units and equity during the rights offering period.

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Kouki, Mondher, and Dabboussi Moez. "Does management entrenchment explain agency costs of equity: Evidence from French firms." Corporate Board role duties and composition 12, no. 3 (2016): 51–60. http://dx.doi.org/10.22495/cbv12i3art6.

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The purpose of this study is to examine the effect of the management entrenchment on the agency costs of equity. We conduct tests on 120 French companies over the period 2000-2014 in order to test the impact of the main factors that can intensify the conflicts between shareholders and managers. We use three alternative measures of agency costs of equity, namely asset utilization, operating expenses and administrative expenses. According to the empirical results, the CEO age, his dual role of executive and chairman, and the discrepancy between ownership and voting rights are relevant determinants of agency conflicts between shareholders and managers. Furthermore, we find that the manager’s seniority and his ownership constitute internal governance mechanisms for the French companies.

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Moche Halman, Rony. "Equity agency costs in payouts, pension plan manipulation and firm performance." Managerial Finance 39, no. 11 (October 14, 2013): 1056–76. http://dx.doi.org/10.1108/mf-09-2011-0218.

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Aras, Guler, and Ozlem Kutlu Furtuna. "Does Governance Efficiency Affect Equity Agency Costs? Evidence from Borsa Istanbul." Emerging Markets Finance and Trade 51, sup2 (March 31, 2015): S84—S100. http://dx.doi.org/10.1080/1540496x.2014.998944.

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Caban, David. "The motivational heterogeneity of an all-equity capital structure." Review of Accounting and Finance 17, no. 2 (May 14, 2018): 215–37. http://dx.doi.org/10.1108/raf-12-2016-0196.

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Purpose This paper aims to investigate whether all-equity firms are a heterogeneous group as it relates to agency costs when compared to a matched sample of levered firms and to contribute toward the understanding of the “low leverage” puzzle and the motivations behind such a perplexing phenomenon. Design/methodology/approach Propensity score matching (PSM) is used to control for endogeneity issues common to this line of research. Because all-equity firms are self-selecting, it is not possible to conduct a true randomized study. PSM attempts to simulate a randomized study by selecting matching observations with similar propensity scores as the all-equity observations. Findings Agency costs are not the only explanation leading to the implementation of an all-equity capital structure. The motivation of such structure is strongly influenced by free cash flows (FCF) and growth opportunities (GO), whereby firms that have high levels FCF combined with low GO exhibit higher levels of agency costs versus their levered peers, while those that have low levels of FCF and high GO exhibit no significant difference in agency costs. Practical implications A better understanding of why a firm chooses such an extreme capital structure can help investors, auditors and potential future creditors in their decision-making process. Originality/value Most prior research treats capital structure as an exogenous variable. By applying PSM, not previously used in prior research, a new methodology is used to address the endogeneity issue related to observational studies such as this one. This paper contributes toward further understanding the perplexing “low-leverage” puzzle often discussed in the financial and accounting literature.

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Mahmood, Faiq, Amir Inam Bhutta, and Muhammad Usman. "Effect of Executive Ownership on the Relationship between Agency Cost and Equity Mispricing." Global Social Sciences Review IV, no. IV (October 30, 2019): 171–79. http://dx.doi.org/10.31703/gssr.2019(iv-iv).23.

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The purpose of the current work is to investigate the influence of agency cost on equity mispricing for the firms listed on Pakistan Stock Exchange during the period from 2008 to 2016. Agency cost is estimated by asset utilization ratio, mispricing is computed by book- to -market ratio and some firms characteristic such as size, profitability and leverage are taken as control variables. Balanced panel method is used to estimate the results. The sample is divided into two parts on the basis of stock mispricing; undervalued and overvalued firms. The influence of agency costs is then separately examined on both sub-samples. Moreover, the effect of managerial ownership on the relationship between agency cost and mispricing is investigated. Results show that agency cost is positively linked with equity mispricing. Moreover, findings demonstrate that for undervalued firms, effect of agency costs is stronger but for overvalued firm, it is weaker and negative. Results are consistent with previous studies.

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Chen, Kevin C. W., Zhihong Chen, and K. C. John Wei. "Agency Costs of Free Cash Flow and the Effect of Shareholder Rights on the Implied Cost of Equity Capital." Journal of Financial and Quantitative Analysis 46, no. 1 (September 17, 2010): 171–207. http://dx.doi.org/10.1017/s0022109010000591.

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AbstractIn this paper, we examine the effect of shareholder rights on reducing the cost of equity and the impact of agency problems from free cash flow (FCF) on this effect. We find that firms with strong shareholder rights have a significantly lower implied cost of equity after controlling for risk factors, price momentum, analysts’ forecast biases, and industry and year effects than do firms with weak shareholder rights. Further analysis shows that the effect of shareholder rights on reducing the cost of equity is significantly stronger for firms with more severe agency problems from FCFs.

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Shaikh, Salman Ahmed. "Poverty alleviation through financing microenterprises with equity finance." Journal of Islamic Accounting and Business Research 8, no. 1 (February 13, 2017): 87–99. http://dx.doi.org/10.1108/jiabr-07-2013-0022.

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Purpose This paper aims to achieve scale, efficiency and mitigate high monitoring costs, and explores the efficacy of micro equity finance at the enterprise level. The study compares the economic features of the proposed framework with interest-based debt finance. Design/methodology/approach This study uses a mathematical model to highlight the problem of agency costs including adverse selection and moral hazard. Findings Debt finance requires frequent repayments and indebtedness for financial inclusion. Conversely, the Islamic equity modes of financing in their current baseline structure suffer from high agency costs. By using enterprise level finance and distinct entry criterion for availing Islamic debt-based and micro equity finance, Islamic microfinance institutions (IMFIs) can reach the right targets and effectively mitigate the problem of adverse selection and high monitoring costs. The study suggests a framework in which equity financing could be used to fund microenterprises that will employ poor people with related skills. Research limitations/implications As the preferable modes of Islamic finance, i.e. Musharakah and Mudarabah, are not used by Islamic financial institutions (IFIs), empirical analysis of performance is not possible as they are rarely used. Practical implications The study suggests a workable model that can use Islamic equity-based modes of financing to improve microfinance outreach and achieve scale. The use of equity financing will help the Islamic finance industry to move toward its egalitarian vision, and the practical implementation of the model will help in reducing poverty in the Muslim majority countries. Social implications Muslim countries host half of global poverty, even though their share in global population is only one-fourth. Hence, there is need for solutions in achieving scale in poverty alleviation efforts. Originality/value Using a mathematical model, the paper presents agency problems in Islamic microfinance and proposes a solution through distinct entry criterion and enterprise level micro equity finance.

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Mann, Steven V., and Neil W. Sicherman. "The Agency Costs of Free Cash Flow: Acquisition Activity and Equity Issues." Journal of Business 64, no. 2 (January 1991): 213. http://dx.doi.org/10.1086/296534.

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Mann, S. V., and N. W. Sicherman. "The agency costs of free cash flow: acquisition activity and equity issues." Insurance: Mathematics and Economics 12, no. 1 (February 1993): 78. http://dx.doi.org/10.1016/0167-6687(93)91048-y.

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Fieberg, Christian, Richard Lennart Mertens, and Thorsten Poddig. "The relevance of credit ratings over the business cycle." Journal of Risk Finance 17, no. 2 (March 21, 2016): 152–68. http://dx.doi.org/10.1108/jrf-08-2015-0079.

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Purpose Credit market models and the microstructure theory of the ratings market suggest that information provided by credit rating agencies becomes more relevant in recessions when agency costs are high and less relevant in expansions when agency costs are low. The purpose of this paper is to empirically test these hypotheses with regard to equity markets. Design/methodology/approach The authors use business cycle identification algorithms to map rating events (credit rating changes and watchlist inclusions) to business cycle phases and apply the event study methodology. The results are backed by cross-sectional regressions using a variety of control variables. Findings The authors find that the relevance of information provided by credit rating agencies for equity prices heavily depends on the level of agency costs. Furthermore, the authors detect a “flight-to-quality” during recessions in the speculative grade segment and a weakened relevance of rating events in expansions in the investment grade segment. Originality/value This paper is the first to empirically analyse how equity investors perceive credit rating changes and watchlist inclusions over the business cycle. In the empirical analysis, the authors use a large sample of about 25,000 rating events in all Organisation for Economic Co-operation and Development markets. The presented results underline that credit ratings address the agency problem in financial markets and can thus be regarded as useful for risk management or regulation.

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Sun, Yufeng, Min Hu, Wenbo Zhou, and Wei Xu. "Multiobjective Optimization for Pavement Network Maintenance and Rehabilitation Programming: A Case Study in Shanghai, China." Mathematical Problems in Engineering 2020 (July 13, 2020): 1–11. http://dx.doi.org/10.1155/2020/3109156.

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This study investigates the pavement network maintenance and rehabilitation (M&R) programming problem, over a certain planning horizon and in the context of limited funding. We designed an integer programming model to fulfill three purposes, namely, optimize the road conditions, minimize user disturbance costs, and minimize agency costs. We present a case study in which this model is applied to the pavement network of Shanghai. We investigate the results through the use of five M&R strategies, to identify the Pareto-optimal trade-offs inherent in developing pavement network M&R planning. The results demonstrate that there is a positive relationship between PCI improvement and user disturbance costs and between PCI improvement and agency costs. Additionally, we conduct a comparative analysis between agency and government-oriented strategies to evaluate the effectiveness and equity consideration. The findings suggest that the government-oriented strategy improves the pavement condition effectively with low user disturbance costs, and the agency-oriented strategy accounts for more equity consideration. Finally, we formulate an extension model that considers multiple road types, for application to pavement network M&R programming. The results show that light rehabilitation and preventive maintenance are the most frequently implemented treatments on arterial roads and secondary trunk roads from the case network implementation. This study helps decision-makers identify the trade-offs made when developing a pavement network M&R program.

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Martin, Geoffrey P., Robert M. Wiseman, and Luis R. Gomez-Mejia. "The Interactive Effect of Monitoring and Incentive Alignment on Agency Costs." Journal of Management 45, no. 2 (December 7, 2016): 701–27. http://dx.doi.org/10.1177/0149206316678453.

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The effectiveness of monitoring and incentive alignment as mechanisms for controlling agency costs have been explored separately and in combination, with monitoring substituting for weaknesses in incentive alignment and vice versa; this equates to positive substitution when describing how monitoring and incentive alignment interact to influence shareholder agency costs. We draw upon behavioral agency theory and findings from finance research to offer further theoretical insight into how these mechanisms interact to influence agency costs. Our results suggest that CEO earnings management aimed at preserving their equity wealth (an incentive alignment mechanism) is accentuated by higher levels of concentrated institutional ownership, thereby imposing agency costs on less informed investors. Thus, in addition to being substitutes in controlling agency costs, as previously suggested, monitoring may accentuate the perverse effects of incentive alignment, equating to negative reinforcement, rather than positive substitution. Yet this effect is negated in the absence of CEO power due to dual occupation of the board and CEO roles. We discuss implications of these findings for theory and practice.

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Domenichelli, Oscar. "Main financial factors influencing the survival, development and performance of family firms." RIVISTA DI STUDI SULLA SOSTENIBILITA', no. 1 (March 2012): 125–43. http://dx.doi.org/10.3280/riss2012-001008.

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Sometimes the impossibility of employing an adequate level of debt may prevent family firms from developing or reaching high performance; however, they can increase their ability to collect debt finance thanks to personal assets to collateralize or personal guarantees, supplied by family members. Furthermore, agency costs of equity are negligible in family businesses, owing to the insignificant separation among the functions of ownership, control and management and their intra-familial altruistic linkages, but agency costs of debt are high, as family firms are usually small or medium-sized enterprises and, thus, more opportunistic and little transparent. Agency conflicts between majority and minority shareholders prevent family firms, to some extent, from getting equity finance and developing, as non-family and minority shareholders may undergo a loss of personal wealth. The level of debt tends to increase when family firms grow. In the early stages of its development, a family-owned firm usually relies on personal savings and sources of capital provided by friends and relatives; while, in the later stages of its growth, a family-owned firm can more easily employ debt and external equity to finance its development.

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Kałdoński, Michał, and Tomasz Jewartowski. "Agency Costs of Overvalued Equity and Earnings Management in Companies Listed on WSE." Economics and Business Review 3 (17), no. 1 (2017): 7–37. http://dx.doi.org/10.18559/ebr.2017.1.2.

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Chiang, Yi-Chein, and Chun-Lein Ko. "An empirical study of equity agency costs and internationalization: Evidence from Taiwanese firms." Research in International Business and Finance 23, no. 3 (September 2009): 369–82. http://dx.doi.org/10.1016/j.ribaf.2009.01.001.

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González, Francisco. "Bank Equity Investments: Reducing Agency Costs or Buying Undervalued Firms? The Information Effects." Journal of Business Finance & Accounting 33, no. 1-2 (January 2006): 284–304. http://dx.doi.org/10.1111/j.1468-5957.2006.01365.x.

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Jensen, Michael C. "The Agency Costs of Overvalued Equity and the Current State of Corporate Finance." European Financial Management 10, no. 4 (December 2004): 549–65. http://dx.doi.org/10.1111/j.1354-7798.2004.00265.x.

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Bae, Sung C., Daniel P. Klein, and Raj Padmaraj. "Event Risk Bond Covenants, Agency Costs of Debt and Equity, and Stockholder Wealth." Financial Management 23, no. 4 (1994): 28. http://dx.doi.org/10.2307/3666081.

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Jabbouri, Imad, and Abdelillah El Attar. "Does a high dividend payout ratio signal proper corporate governance or high agency cost of debt?" Corporate Ownership and Control 14, no. 2 (2017): 51–58. http://dx.doi.org/10.22495/cocv14i2art5.

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This paper examines the relationship between dividend policy and the cost of debt in Morocco. The results show that high dividend payments reflect a low level of agency costs of equity and low information asymmetries. Consequently, creditors demand lower return for providing their capital to high dividend-paying firms. The findings reveal that creditors are less concerned with agency costs of debt. The study shows that the negative relationship between dividend payout ratios and cost of debt is more pronounced in firms with higher information asymmetries.

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Ang, Andrew, and Morten Sorensen. "Risks, Returns, and Optimal Holdings of Private Equity: A Survey of Existing Approaches." Quarterly Journal of Finance 02, no. 03 (September 2012): 1250011. http://dx.doi.org/10.1142/s2010139212500115.

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We survey the academic literature that examines the risks and returns of private equity investments, optimal private equity allocation, and compensation contracts for private equity firms. The irregular nature and limited data of private equity investments complicate the estimation and interpretation of standard risk and return measures. These complications have led to substantial disparity in performance estimates reported across studies. Moreover, studies suggest that the illiquidity and transaction costs inherent in private equity investments have substantial implications for optimal holdings of these assets. While incentive fees in private equity address moral hazard and information agency problems, total fees in private equity investments are very large and incentive fees account for a minority of total compensation.

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Dai, Z. M., and Lu Guo. "Research on equity adjustment, agency costs and commercial bank performance: experimental evidence from China." Applied Economics 51, no. 22 (December 2, 2018): 2413–21. http://dx.doi.org/10.1080/00036846.2018.1545078.

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AGRAWAL, ANUP, and NANDU J. NAGARAJAN. "Corporate Capital Structure, Agency Costs, and Ownership Control: The Case of All-Equity Firms." Journal of Finance 45, no. 4 (September 1990): 1325–31. http://dx.doi.org/10.1111/j.1540-6261.1990.tb02441.x.

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Holderness, Clifford G. "Equity issuances and agency costs: The telling story of shareholder approval around the world." Journal of Financial Economics 129, no. 3 (September 2018): 415–39. http://dx.doi.org/10.1016/j.jfineco.2018.06.006.

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Jadiyappa, Nemiraja, Pavana Jyothi, Bhanu Sireesha, and Leila Emily Hickman. "CEO gender, firm performance and agency costs: evidence from India." Journal of Economic Studies 46, no. 2 (March 4, 2019): 482–95. http://dx.doi.org/10.1108/jes-08-2017-0238.

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PurposeThe purpose of this paper is to examine the effect of CEO gender on the performance of Indian firms and to explain the economic channel for any such effect.Design/methodology/approachUsing a panel of 100 Indian firms, the authors test whether there is a significant difference in the performance – measured as return on assets (ROA) and return on equity (ROE) – of firms with male vs female CEOs, in both time and space dimensions, using the difference-in-differences approach.FindingsThe average ROA of the sample firms decrease by about 10 percent after a female enters the CEO role. This negative result remains robust in both the time series as well as cross-sectional analyses. The decline is also observed when using ROE to measure performance. Further, the authors show that this negative effect is associated with an increase in agency costs that is observed following the appointment of a female CEO.Originality/valuePrevious studies have produced mixed results regarding the effect of having a female CEO on firm performance, and the research to date has not explored the economic channel through which this effect occurs. In this study, the authors show that the decline in performance observed among Indian firms flows from an increase in agency costs under female management.

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McConaughy, Daniel L., Manjeet S. Dhatt, and Yong H. Kim. "Agency Costs, Market Discipline and Market Timing: Evidence from Post-IPO Operating Performance." Entrepreneurship Theory and Practice 20, no. 2 (January 1996): 43–58. http://dx.doi.org/10.1177/104225879602000205.

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We compare ninety-nine 1985 IPO firms with a matched sample of “seasoned” firms. The IPO firms were more efficient and profitable, yet exhibited declining market-to-book-equity ratios over the 1985-1992 period. However, we observe no significant trend toward lower efficiency or profitability among the IPO firms. In fact, we observe a significant improvement in operating efficiency five to six years after the IPO. Post-IPO evidence suggests that (1) agency costs do not Increase; (2) the markets discipline entrepreneurs with incentives to maintain pre-IPO performance; and (3) poor stock performance is due to investors who overpay, extrapolating current performance into the future.

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Lizarzaburu Bolaños, Edmundo, Luis Berggrun, and Kurt Johnny Burneo Farfan. "Corporate governance in emerging markets and its impact on finance performance." Corporate Ownership and Control 12, no. 1 (2014): 625–32. http://dx.doi.org/10.22495/cocv12i1c7p2.

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This paper reviews the theoretical framework of Corporate Governance and multiple issues in which it is evaluated such as agency costs, asymmetric information, insider trading, manipulation of earnings, Board of Directors, etc. Finally, it is reviewed the impact of Corporate Governance over cost of equity, capital structure and financial performance

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Dawson, Alexandra. "Private equity investment decisions in family firms: The role of human resources and agency costs." Journal of Business Venturing 26, no. 2 (March 2011): 189–99. http://dx.doi.org/10.1016/j.jbusvent.2009.05.004.

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Givoly, Dan, Carla K. Hayn, and Sharon P. Katz. "Does Public Ownership of Equity Improve Earnings Quality?" Accounting Review 85, no. 1 (January 1, 2010): 195–225. http://dx.doi.org/10.2308/accr.2010.85.1.195.

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ABSTRACT: We compare the quality of accounting numbers produced by two types of public firms—those with publicly traded equity and those with privately held equity that are nonetheless considered public by virtue of having publicly traded debt. We develop and test two hypotheses. The “demand” hypothesis holds that earnings of public equity firms are of higher quality than earnings of private equity firms due to stronger demand by shareholders and creditors for quality reporting. In contrast, the “opportunistic behavior” hypothesis posits that public equity firms, because their managers have a greater incentive to manage earnings, have lower earnings quality than their private equity peers. The results indicate that, consistent with the “opportunistic behavior” hypothesis, private equity firms have higher quality accruals and a lower propensity to manage income than public equity firms. We further find that public equity firms report more conservatively, in line with their greater litigation risk and agency costs.

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Vijayakumaran, Ratnam. "Capital Structure Decisions and Corporate Performance: Evidence from Chinese Listed Industrial Firms." International Journal of Accounting and Financial Reporting 7, no. 2 (May 3, 2018): 562. http://dx.doi.org/10.5296/ijafr.v7i2.12455.

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Market imperfections such as taxes, asymmetric information and agency problems make capital structure decisions relevant to the value of the firm. More specially, the agency theory suggests that debt financing is one of the governance mechanisms to mitigate agency costs of equity capital and thus to enhance firm performance. This paper provides new empirical evidence on the performance effects of capital structure decisions using a large panel of Chinese listed industrial firms. Using fixed effects regression method, the study finds that leverage is positively related to firm performance, suggesting that debt financing now acts as a governance mechanism for Chinese listed firms to enhance their performance.

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Gesser, Ruth, Rony Halman, and Oded Sarig. "Measuring the agency costs of dispersed ownership: the case of repurchase initiations." Corporate Ownership and Control 11, no. 3 (2014): 30–49. http://dx.doi.org/10.22495/cocv11i3p2.

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Empirical investigations of the agency costs of dispersed ownership yield mixed results. A possible explanation for the lack of conclusive evidence is inaccurate measurement of the extent of the problem. We suggest that the extent of the problem be measured as theory suggests: by the wealth that managers commit to their firms. We examine the relative performance of different measures of the agency problem of dispersed ownership in the context of changes in payout policy affected by repurchase initiations. We find that the suggested measure – managerial equity wealth – can explain better than any other measure the market reaction to repurchase initiations. We also find that market reaction to repurchase initiation is smaller for firms with high media coverage than for firms with low media coverage and that repurchases that follow a large rise in stock prices elicit relatively small market reactions. Lastly, we find that market reaction to repurchase announcements decreases with the dividend yield of the firm, which suggests that share repurchases are relatively less important when dividends are used to alleviate the problems of free cash flows. Our results are robust to several modifications of the main test.

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Risliana, Febri. "PENGARUH GOOD CORPORATE GOVERNANCE DAN KEBIJAKAN HUTANG TERHADAP AGENCY COST." Jurnal Riset Ekonomi dan Bisnis 12, no. 3 (December 19, 2019): 206. http://dx.doi.org/10.26623/jreb.v12i3.1663.

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<div class="Section1">Penelitian ini bertujuan untuk menguji bagaimana peran good corporate governance dan kebijakan hutang terhadap agency cost. Penelitian ini menggunakan metode eksplanasi. Variabel yang diteliti adalah variabel bebas yaitu Kepemilikan Manajerial, Kepemilikan Institusional dan Ukuran Dewan Direksi, sedangkan variabel terikat adalah Agency Cost. Populasi penelitian ini adalah perusahaan yang terdaftar di Bursa Efek Indonesia, adapun teknik pengambilan sampel yang digunakan adalah purposive sampling. Teknik pengolahan dan analisis data yang digunakan adalah analisis statistik deskriptif dan analisis regresi linier berganda. Hasil penelitiah membuktikan bahwa good corporate governance yang diproksi dengan kepemilikan manajerial, kepemilikan institusi dan ukuran dewan direksi berpengaruh terhadap agency cost. Kebijakan hutang yang diproksi dengan debt to equity ratio berpengaruh terhadap agency cost.This study aims to examine how the role of good corporate governance and debt policy towards agency costs. This research uses the explanation method. The variables studied were independent variables namely Managerial Ownership, Institutional Ownership and Board of Directors Size, while the dependent variable was Agency Costs. The population of this study is companies listed on the Indonesia Stock Exchange, while the sampling technique used is purposive sampling. Data processing and analysis techniques used are descriptive statistical analysis and multiple linear regression analysis. The results of the study prove that good corporate governance which is proxied by managerial ownership, institutional ownership and the size of the board of directors influences agency costs. Debt policies which are proxied by the ratio of debt to capital affect agency costs.<pre> </pre></div>

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Olubukola Otekunrin, Adegbola, Tony Ikechukwu Nwanji, Damilola Eluyela, Johnson Kolawole Olowookere, and Damilola Gabriel Fagboro. "Capital structure and profitability: the case of Nigerian deposit money banks." Banks and Bank Systems 15, no. 4 (December 28, 2020): 221–28. http://dx.doi.org/10.21511/bbs.15(4).2020.18.

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This paper aimed to empirically examine the extent to which capital structure impacts the profitability of Nigerian Deposit Money Banks considering the profitability of eight Nigerian Deposit Money Banks from 2003 to 2018 (16 years). A descriptive research design was adopted for this study, and data were analyzed using regression. The study used secondary data obtained from published annual reports of selected Nigerian Deposit Money Banks on the Nigerian Stock Exchange (NSE) for four years (2003–2018). The study concluded that the indicators used to measure capital structure (debt-equity ratio and leverage ratio) and profitability (returns on equity) had a negative relationship. This means that the use of debts mixed with equity (debt-equity ratio and leverage ratio) in improper proportion as financing methods can negatively affect profitability. Hence, there is a need to identify the optimal mix of capital structure (debts mixed with equity) that maximizes profitability, as well as firm and shareholder value with minimum agency costs as suggested by the trade-off theory and agency theory, respectively. The alternative is to give preference to retained earnings (internal source of finance) as funding source. AcknowledgmentAll researchers and non-researchers that contributed to this paper are highly appreciated.

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Datta, Sudip, and Alex Kostyuk. "Editorial note." Corporate Ownership and Control 15, no. 4-1 (2018): 134–35. http://dx.doi.org/10.22495/cocv15i4c1_editorial.

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The actual volume of Corporate Ownership and Control Journal is devoted to the issues of agency costs, value creation, CFO gender, ethics, risk-aversion, cloud accounting, internal auditing, external audit pricing and fees, executive compensation, corporate ownership, wage rigidity, board of directors, audit committees, information disclosure, international standards on auditing, private equity, firm value, earnings management, cash flows, blockchain, corporate social responsibility etc.

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Carleton, Willard T., Carl R. Chen, and Thomas L. Steiner. "Optimism Biases among Brokerage and Non-Brokerage Firms' Equity Recommendations: Agency Costs in the Investment Industry." Financial Management 27, no. 1 (1998): 17. http://dx.doi.org/10.2307/3666148.

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Bhagat, Sanjai, Brian Bolton, and Ajay Subramanian. "Manager Characteristics and Capital Structure: Theory and Evidence." Journal of Financial and Quantitative Analysis 46, no. 6 (June 8, 2011): 1581–627. http://dx.doi.org/10.1017/s0022109011000482.

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AbstractWe investigate the effects of manager characteristics on capital structure in a structural model. We implement the manager’s optimal contracts through financial securities that lead to a dynamic capital structure, which reflects the effects of taxes, bankruptcy costs, and manager-shareholder agency conflicts. Long-term debt declines with the manager’s ability, inside equity stake, and the firm’s long-term risk, but increases with its short-term risk. Short-term debt declines with the manager’s ability, increases with her equity ownership, and declines with short-term risk. We show support for these implications in our empirical analysis.

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Journal articles on the topic 'Equity Agency Costs'

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