Whether the Corporation's Agency Costs Could Be Influenced by Marketization

Abstract

As several financial Scandals happened in the last two decades, internal control become important in corporate governance. Most scholars illustrate that internal control is the key factor in improving the firm performance by reducing agency costs. The research mainly tests that agency costs, as the mediator of internal control and firm performance, could be influenced by marketization. And use the market index as the creative point in measuring marketization. Then the empirical evidence has been developed by listed corporations from the Shanghai Stock Exchange Market. The results showed that agency costs are effective in reducing the market with higher marketization. Agency costs are less significant in increasing firm value in provinces with lower marketization (governments with higher power over law). The fair value of the information disclosure, strict regulation and monitors, and less power of government over the law on the market are all important factors to influence agency costs.