Effect Of Agency Cost Research Articles

The Effect of Environmental Performance and Agency Cost on Financial Performance

The Effect of Environmental Performance and Agency Cost on Financial Performance

PENGARUH PENGHINDARAN PAJAK DAN BIAYA AGENSI TERHADAP NILAI PERUSAHAAN DENGAN TRANSPARANSI SEBAGAI VARIABEL PEMODERASI

This research aims to analyze the effect of tax avoidance and agency costs on company value with transparency as a moderating variable. The type of research used in this research is quantitative. The data source used is secondary data, namely annual financial reports obtained from the Indonesia Stock Exchange (BEI). The population used in this research is non-cyclical industrial sector manufacturing companies listed on the Indonesia Stock Exchange (BEI) during the 2018-2022 period. The sample selection technique used purposive sampling technique and obtained 19 companies over 5 years with a total sample data obtained of 95 sample data. The results of this study indicate that tax avoidance and agency costs simultaneously have no effect on firm value, tax avoidance has no effect on firm value, agency costs have no effect on firm value, tax avoidance has no effect on firm value with transparency as a moderating variable, while agency costs influence on company value with transparency as a moderating variable.

Capital structure and the firm performance nexus: the moderating and mediating roles of agency cost

PurposeThe purpose of this study is to examine the linear and non-linear relationship between capital structure (CS) and firm performance (FP) and the moderating and mediating roles of agency costs in the CS-FP nexus.Design/methodology/approachThis study used static and quadratic panel data regression models to examine the linear and non-linear relationships and structured equation models to analyze the mediating effect of agency costs in the CS-FP nexus of 38 listed non-financial Mauritian firms from 2009 to 2019.FindingsLeverage has a significant negative effect on FP supporting the pecking order theory. Agency costs are significantly and positively associated with FP. There is a strong non-linear relationship between leverage and FP supporting the trade-off and agency cost theories. Agency costs are an important moderator and mediator in the CS-FP nexus. Overall, the sensitivity analyses showed that the results were robust.Practical implicationsFirms need to carefully consider the levels and types of debt and equity in their CS involving the use of dynamic strategies to adjust CS in response to changing economic conditions and FP. The moderating effect of agency costs may guide firms in optimizing CS and may contribute to corporate governance discussions, emphasizing the importance of aligning interests to foster sustainable business practices.Originality/valueThis study adds to the extant literature by providing new evidence on the non-linear relationship between leverage and FP and the moderating and mediating roles of agency costs in the CS-FP nexus in emerging capital markets, where such studies are rare.

Corporate social responsibility and labor investment efficiency: evidence from China

PurposeWe expect to provide a complete theoretical framework and large sample evidence on the impact of corporate social responsibility (CSR) on the efficiency of labor investment. We also hope to provide micro-evidence based on labor investment behavior for the two-sided impact of corporate CSR behavior.Design/methodology/approachThis paper measures labor investment efficiency by estimating the difference between actual and expected net hiring of enterprises. CSR is measured on the basis of the CSR score of Chinese listed companies published by Hexun.com. A regression model is constructed to analyze the relationship between CSR and labor investment efficiency. Possible endogeneity problems are controlled by lagging independent variables, propensity score matching method and difference-in-difference method.FindingsResults show that CSR can improve labor investment efficiency by reducing over-hiring and under-hiring in emerging markets. The existence of the mediating effect of agency cost, information disclosure quality and employment fluctuation confirms that CSR improves labor investment efficiency through two mechanisms of corporate governance and labor market friction. The improvement effect of CSR on labor investment efficiency is more significant in non-state-owned, high CEO shareholding ratio and high-average urban wage enterprises.Originality/valueIn conclusion, our study is an important supplement to the existing research on the factors affecting labor investment efficiency. Our research conclusions will be helpful for enterprises in developing countries or enterprises in labor-intensive industries to improve labor investment inefficiency. The conclusion of the mechanism analysis in this paper provides more complete and reliable microscopic evidence for accurately identifying the specific path of CSR's impact on labor investment efficiency. This paper verifies the positive impact of CSR from the perspective of labor investment efficiency in the context of a developing country, which provides evidence for the theoretical conflicts related to CSR based on the effectiveness of enterprise labor investment decisions.

An Empirical Assessment of the Nexus between Agency Cost and Tax Compliance in Listed Firms in Nigeria

Tax compliance in listed firms poses challenges due to the inherent agency problems within the corporate structure that require additional administrative costs, which the company must incur to put the agent in check to achieve organisation targets. This study examined the effect of agency costs on tax compliance in listed firms in Nigeria. A cross-sectional time-series research design was used. The study population was 155 firms listed on the Nigerian Exchange Group (NGX) as of 31st December 2022. The study used 20 firms as a sample size using a purposive sampling technique. Data were obtained from the audited annual financial reports of the firms from 2013 to 2022. Panel data regression (PDR) was used to analyse the collected data. The findings revealed that monitoring costs measured by audit fees, audit specialisation, and ICT investment have an insignificant effect on tax compliance. In addition, the bonding costs measured by board remuneration and employee incentives showed an insignificant effect on tax compliance, while residual loss measured by Employee shareholding does not significantly affect tax compliance. The implication is that the agency cost incurred by the shareholders to reduce agency problems does not significantly affect their tax compliance. However, monitoring costs, bonding costs, and residual loss have negative and insignificant effects on tax compliance. The study concluded that the costs of the agency have no significant effect on tax compliance in listed firms in Nigeria. Firms should explore ways to enhance the effectiveness of monitoring, bonding and residual activities to ensure better alignment with tax compliance objectives.

The Effect of Non Performing Loan, Agency Cost, Good Corporate Governance, and Credit Policy to Bank Profitability

The study attempts to investigate the effect of Agency Cost (AGCOST), Good Corporate Governance (GCG), Capital Adequacy Ratio (CAR), Loan Deposit Ratio (LDR), Non Performing Loan (NPL), interest rate (BI7DAY) and foreign exchange rate (KURS) to bank profitability measured by Return on Assets (ROA). The sample consists of 29 banks listed in Otoritas Jasa Keuangan (OJK) during 2012 – 2021. Sampling method was census. Data analysis method was panel data regression method. The novelty of the research is using the ratio of board of director’s and commissioner’s remuneration to total salary as the proxy of AGCOST. GCG was proxied by percentage of institutional ownership. Result shows that NPL, AGCOST and GCG have a significant negative effect to ROA; CAR and BI7DAY have a significant positive effect to ROA; LDR and KURS have a insignificant effect to ROA. Conclusion of the study: escalating the board’s remuneration and institutional ownership will decrease ROA.

Analysis of the Effects of Agency Costs on Financial Performance of Commercial Banks Listed at the Nairobi Securities Exchange in Mombasa County, Kenya

Agency costs result from a principal-agent relationship's conflicting interests. The relationship develops because the principal may not be able to manage the business since they are technologically illiterate, numerous, and geographically spread; as a result, they hire the agent. In a commercial bank, there are various relationships that show principal agent relationships, with the most prevalent one being the link between the shareholders and the management. Agency fees are paid with the intention of aligning the agents' and principal's ambitions in order to realize the principal's overarching intentions. Therefore, the perseverance of this study was to analyze agency costs and their effects on financial performance. In this study, the agency cost on financial performance of public commercial banks was analyzed. Specific objectives were; to establish how monitoring cost affect the financial performance of quoted commercial banks in Mombasa County, to assess the effect of bonding cost on financial performance of listed commercial banks in Mombasa county, to examine the extent to which residual loss affect the financial performance of commercial banks in Mombasa county and to determine the effects of restructuring cost on financial performance of listed commercial banks in Mombasa County- directed the study. Theories supporting this study were as follows; agency theories, free cash flow and stakeholder’s theory. Descriptive design is a kind of research methodology which establishes the connection between variables. It was used in this study to identify both the broad and the detailed study goals. A census of the 10 listed commercial banks in Mombasa County was conducted as part of the work and purposive sampling was be used. This study used qualitative and quantitative methods. Validity was tested through interview while reliability was tested using Cronbach alpha. The data was analyzed using inferential statistics like regression and correlation and descriptive statistics like mean and standard deviation using the Statistical Package for Social Science (SPSS) Version 22.0. The results were presented using cross tabulation, frequency tables, and charts. Findings indicated that there was a significant impact between; monitoring cost, bonding cost and residual cost and the financial performance. Restructuring cost were determined to have a favourable impact on financial performance. Therefore, the study recommends implementing an efficient internal control system by listed commercial bank management. This will assist in cutting down on the cost of auditing, administrative costs, and wasteful and unneeded spending, Managers should be paid more and attaching monetary or share bonuses or option entitlements to particular firm performance and to adopt a type of restructuring that will align with the relevant strategy and objectives.

Effects of agency costs on the relationship between tax avoidance and firm value: A case of Chinese companies

This study aims to examine the impact of agency costs on the relationship between tax avoidance and firm value in Chinese companies. Generally, a positive relationship exists between corporate tax avoidance and firm value when a company's internal controls are robust and managerial incentives towards shareholder rights are significant. However, engaging in tax avoidance doesn't guarantee an automatic improvement in firm value. Companies need to carefully evaluate the revenue generated and the costs incurred due to agency issues when making tax-avoidance decisions that benefit the company's growth. The main findings of the study are as follows: First, there is a statistically significant positive relationship between tax avoidance and firm value. This implies that the tax savings resulting from tax avoidance lead to an increase in firm value, either through efficient investment or through higher shareholder returns. Second, as CEO (Chief Executive Officer) agency costs increase, the relationship between tax avoidance and firm value is attenuated. This suggests that the tax savings from tax avoidance are offset by CEO agency costs, or that the purpose of tax avoidance is related to opportunistic behaviour rather than increasing firm value. The findings of this study highlight the importance of enhancing corporate governance to decrease agency costs and the significance of reducing information asymmetry between internal and external entities within the company. This will help effectively utilize tax savings from tax avoidance for firm investment.

Do agency costs and business risk affect the corporate sustainability–financial performance relationship?

PurposeThe aim of this research is to examine the effect of corporate sustainability performance on financial performance and the role of agency costs and business risk in determining this effect.Design/methodology/approachThis study uses the data of 83 non-financial Turkish firms listed on Istanbul Stock Exchange during the period 2014–2021. Two-step system GMM models are applied to examine the study’s hypotheses.FindingsThe results indicate a positive effect of corporate sustainability performance on financial performance, and that this effect is significant only for firms that are more likely to suffer agency costs of equity, firms with R&D expenditures and firms with lower business risk.Practical implicationsThe results of this study confirm the importance of regulations introduced by regulators to support the sustainability initiatives for firms that have less ability to access funds required for their investments. In addition, the findings provide important insight into the role of the persistence of corporate sustainability performance in enhancing financial performance through mitigating managers' opportunistic behavior.Originality/valueTo the author’s knowledge, this research is one of few that examine the effect of agency costs and business risk on the corporate sustainability–financial performance relationship in emerging markets.

Boardroom Alchemy: Unravelling the Debt and Agency Costs in Manufacturing Sector of Pakistan

The current study aims to investigate boardroom diversity and its varying characteristics by using agency theory to examine the effect of debt and agency costs in the manufacturing sector of Pakistan. Precisely, it seeks to examine how board size, independence, and gender diversity affect the financial matrices of a firm’s profitability. Therefore, the study utilized an imbalanced panel of 105 manufacturing companies that were listed on the Pakistan Stock Exchange (PSX) 2003 to 2022. Furthermore, the study utilized static and dynamic panel models to examine and evaluate the proposed hypotheses. The findings of this study indicated that there is a positive relationship between board size, gender diversity, and debt and agency costs for manufacturing enterprises in Pakistan. Conversely, it was observed that board independence has a negative impact on the debt and agency costs of firms. Future research can use experimental or longitudinal approaches, including varied businesses, to investigate qualitative research for deeper insights. Cross-cultural comparisons would support the findings. Consequently, this study highlighted the importance of exercising caution when evaluating the influence of board composition on debt and agency costs. The results of the study also prompted inquiries regarding the financial ramifications of initiatives aimed at promoting gender diversity.

THE EFFECT OF FAMILY OWNERSHIP, AGENCY COST, ENVIRONMENTAL PERFORMANCE, CORPORATE SOCIAL RESPONSIBILITY ON FIRM VALUE

In today's dynamic and competitive business conditions, companies must be able to adapt and have the ability to compete so that company goals can be achieved. Company goals can be reflected through the ability to increase company value. This study aimed to examine the effect of family ownership, agency costs, environmental performance, and corporate social responsibility on firm value with financial performance as mediation. The population of this study were food and beverage sub-sector manufacturing companies listed on the Indonesia Stock Exchange (IDX) during 2020-2022. The sample in this study used a purposive sampling method and data analysis techniques using SmartPLS 4.0 by testing the direct and indirect effects between the independent and dependent variables. The results showed that family ownership has a significant effect on firm value, agency costs have a significant effect on firm value, corporate social responsibility has a significant effect on firm value, financial performance has a significant effect on firm value, but environmental performance has no significant effect on firm value. Then, family ownership and corporate social responsibility have no significant effect on financial performance, while agency costs and environmental performance have a significant effect on financial performance. Furthermore, based on research on indirect effects, financial performance does not mediate the influence of family ownership, agency costs, environmental performance, and corporate social responsibility on firm value.

Intercreditor Agreement and Contractual Restructuring of LBOs

Abstract 547Leveraged buyout (LBO) transactions are corporate acquisitions financed with multiple layers of debt and equity and form a large subset of the leveraged finance markets. In European LBOs various creditor-categories, the priorities, control and restructuring options are invariably controlled by intercreditor agreements. They set out a basis for a privatised insolvency procedure. Such privatised procedures are often considered both theoretically and practically impossible because of the risk of strategic creditor actions, the incomplete contracting problem, the incentive effects of agency costs and the difficulties of creditor coordination. This article sets out empirical findings how English law governed intercreditor agreements deal with strategic creditor actions and difficulties in creditor coordination, while creating a structured bargaining space for resolution of financial distress. The empirical analysis consists of content analysis of market ICAs and interviews. I argue that contractual solutions for dealing with financial distress in corporate finance are both theoretically and practically possible. ICAs deal with the most important strategic creditor actions and enable effective restructuring to take place contractually. Also, they can operate between sophisticated multi-round players and without necessarily resorting to the statutory procedures.548

Sukūk development and income inequality

This paper investigates the link between sukūk development and income inequality by scrutinizing twenty-two countries’ data from 1995 to 2019. We employ the two-stage Fractional Regression Model to illustrate that sukūk issuance is associated with increased income disparity. This result is attributed to the sukūk design ignoring credit market frictions. This rationalizes the sukūk-inequality nexus in light of the ethical objectives of Islamic law. We argue that reinforcing property rights by mitigating the ill effects of excessive risk-taking (i.e., gharar) and endemic agency costs of debt (i.e., ribā) in our ethical framework can improve sukūk’s role in socio-economic development.

Impacts of Free Cash Flow and Agency Cost on Firm Performance

This study aims to examine the effect of free cash flow and agency cost to firm performance. The purpose of this study to provide empirically evidence about the effect of free cash flow and agency cost to firm performance. This study also examines the free cash flow hypothesis developed by Jensen (1986). Recent study about this topic resulting mixed/various result. Free cash flow in this study measured by free cash flow t-1, agency cost proxied by operating expenses ratio. Firm performance divided into three, operational performance measured by ROA, firm value measured by tobin's q ratio, and share return measured by holding period return. This study will conduct on manufacturing companies listed on Indonesian Stock Exchange period of 2017-2021. Sample were selected by purposive random sampling method and finally obtained 396 samples that fulfill the criteria. Data were analyzed using multiple regression analysis. The result show that free cash flow has insignificant positive effect on firm operational performance, firm value and share return. Agency cost has significant negative effect on firm operational performance, firm value and share return. This study provides empirical evidence of the effect agency cost on firm performance and provides contribution to the literature on free cash flow hypothesis topics

Effect of Agency Costs on the Relationship between Dividend Policy and Value of Firms Listed at the Nairobi Securities Excha

Effect of Agency Costs on the Relationship between Dividend Policy and Value of Firms Listed at the Nairobi Securities Excha

A Test of Agency Theory of Divided Relevance on the Firm Value of Listed Nigerian Deposit Money Bank

The main objective of this study is the agency theory of dividend relevance on the firm value of listed Nigerian deposit money banks (DMBs) for ten years, 2011–2020. The study used an ex-post facto panel research design. The data for the study was collected from the published financial statements of sampled banks. The study's dependent variable is market capitalization, a proxy of firm value, while the independent variables are dividend payout and agency cost, respectively. The data estimation was conducted using the panel data technique. The findings showed that the dividend payout and agency cost effects on firm value are positive and negative but statistically significant and insignificant. In contrast, the joint effects of dividend payout and agency cost on a firm's value are statistically insignificant. This result implies that dividend payout has a unique effect (direct effect) on firm value but does not moderate the effect of agency cost on firm value in Nigerian DMBs. This can be attributed to the unique nature of banks, which may be due to the intense supervision by the regulatory authorities.
 Keywords: Agency cost, market capitalization, firm value, direct effect, dividend payout

Information asymmetry, agency costs, and payout policies: An international analysis of IFRS adoption and the global financial crisis

Information asymmetry can affect the propensity of firms to pay dividends directly and indirectly by reducing the agency costs of free cash flow (FCF). However, designing a research framework to identify whether information asymmetry or agency cost directly explains the propensity to pay dividends is challenging, as both are partially endogenous. To overcome this challenge, this study investigates the role of two independent external shocks in explaining the propensity of firms to pay dividends. We use the mandatory adoption of International Financial Reporting Standards (IFRS) as an information asymmetry–reducing event and the global financial crisis (GFC) as an agency cost–reducing event to disentangle the effects of information asymmetry and agency costs. Using a large international sample of more than 100,000 firm-year observations and a matched sample of more than 35,000 observations, we find that the propensity to pay dividends declined after the mandatory adoption of IFRS and then declined further due to the economic shock of the GFC. We also provide evidence that firms facing high information asymmetry and high agency costs have a lower propensity to pay dividends because of the combined effects of IFRS adoption and the GFC. These findings suggest that the agency costs of FCF are more directly relevant in explaining dividend payout policy.

The Moderating Effect of Agency Cost on the Relationship Between Capital Structure and Financial Performance

The Moderating Effect of Agency Cost on the Relationship Between Capital Structure and Financial Performance

The Relationship between Capital Structure and Firm Performance: The Moderating Role of Agency Cost

Since it first appeared, agency theory has argued that debt can decrease agency issues between agent and principal and enhance the value of firms. This paper explores the moderating effect of agency cost on the association between capital structure and firm performance. A panel econometric method, namely a fixed-effect regression model, was used to evaluate the above description. This investigation uses secondary data collected from published annual reports of manufacturing firms listed on Tehran Stock Exchange (TSE) during 2011–2019. Empirical results show that capital structure is negatively related to firm performance. Agency cost also has a negative impact on corporate performance; however, in the case of ROA and EPS, the relationship is positive. Interestingly, the findings illustrate that increasing the level of debt can reduce agency costs and enhance firm performance. Moreover, robust correlations are revealing that agency cost significantly affects the relationship between capital structure and corporate performance. These findings provide proof to support the assumptions of agency theory, which explains the association between capital structure and performance of firms. This study provides new perspectives on the relationship between capital structure and firm performance by using data from listed manufacturing firms in Iran; hence, these new insights from a developing market improve the understanding of capital structure in Asian and Middle Eastern markets.

How Does Supply Chain Information Disclosure Relate to Corporate Investment Efficiency? Evidence from Chinese-Listed Companies

Supply chain information disclosure is a vital factor for corporate investment efficiency and can signal a corporation’s long-term sustainable development. However, little attention has been paid to its significance. In this paper, we investigate how supply chain information disclosure affects corporate investment decisions. Using a sample of Chinese-listed firms, we find that firms that disclose nonfinancial information are more likely to have a high level of investment efficiency. We also identify the mechanism underlying the effect by examining the mediating effect of financial constraints and agency costs. Increasing a firm’s supply chain information disclosure can improve its investment efficiency by reducing its financial constraints and agency costs. We further find that this positive impact is more pronounced for non-state-owned enterprises (non-SOEs) and firms located in regions with a high degree of marketization. Our findings imply that supply chain information disclosure plays an important role in corporate investment efficiency and sustainable development. Our study emphasizes the importance of nonfinancial information disclosure, contributing to the literature investigating the role of supply chain management in corporate decision-making on sustainable development.