Reduce Agency Problems Research Articles

Faktor-Faktor Yang Mempengaruhi Auditor Switching Pada Perusahaan Consumer Goods Industry Yang Terdaftar Di Bursa Efek Indonesia Periode 2018-2022

Companies use independent auditors to increase the credibility of financial statements in increasing public trust and reducing agency problems, so an auditor must maintain a professional attitude in auditing. The closer relationship between auditors and management can cause auditors to trust management clients more, which may manipulate financial statements or prioritise personal interests, in which case auditor switching is necessary. The purpose of this study is to determine the factors that influence auditor switching in consumer goods industry companies listed on the Indonesia Stock Exchange (IDX) for the period 2018-2022. The research method used is a quantitative approach with purposive sampling method and the analytical tool used in the research is logistic regression analysis. Data processing in this study using SPSS V.20 from secondary data. The population in this study were consumer goods industry companies listed on the IDX. This study used 44 samples of companies, during 5 years of observation 220 reports were analysed. The results of this study prove that simultaneously management change, institutional ownership, leverage, and Return of Assets (ROA) affect auditor switching. Partially, leverage affects auditor switching. Management turnover, institutional ownership, and ROA partially have no effect on auditor switching.

Pengaruh Kepemilikan Manajerial Terhadap Kesulitan Keuangan Perusahaan Sektor Industri Dasar Dan Kimia

Managerial ownership is believed to reduce agency problems that frequently occur in business, which, if not addressed, can lead to financial distress for the company. Extremely high or low managerial ownership can cause issues, such as managers neglecting shareholders' interests or being less motivated to maintain the company's financial stability. This study aims to analyze the effect of managerial ownership on the likelihood of financial distress in basic industry and chemical sector companies listed on the Indonesia Stock Exchange (IDX). A quantitative approach was used in this study. The data consists of annual reports from basic industry and chemical sector companies listed on the IDX from 2018 to 2023. Samples were determined using a purposive sampling method from a population of 73 companies, resulting in 24 companies with a total of 144 samples analyzed. Logistic regression analysis was used to test the hypothesis. The results of this study indicate that higher managerial ownership is associated with a reduced likelihood of financial distress. The findings of this study are useful for shareholders and management in making decisions regarding ownership structure to minimize financial risk.

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.

Customer Concentration and Labor Investment Efficiency: Evidence from China

ABSTRACT: The labor force constitutes a paramount factor of production in the realm of business operations. In the past, China's abundant labor force significantly boosted productivity for firms. However, as the demographic dividend gradually wanes, concerns have arisen regarding a scarcity of labor force, exacerbating worries about rising labor costs. Therefore, focusing on enhancing firms' labor investment efficiency becomes pivotal. Using a sample of A-stock listed firms in China from 2013 to 2020, we examine the impact of customer concentration on the labor investment efficiency of supplier firms. Prior literature provides mixed results regarding the effect of concentrated customers. They can act as a governance mechanism for reducing agency problems, thus, increasing investment efficiency. Conversely, agency problems are aggravated in suppliers with concentrated customers, consequently, reducing investment efficiency. Our results suggest that customer concentration reduces labor investment efficiency, and this effect is more pronounced when customers possess high bargaining power. Additionally, the mechanism analysis reveal that customer concentration leads to less accurate information disclosure, higher operating risk, and an incentive to "empire building", reducing labor investment efficiency. The cross-sectional analysis reveals that customer concentration results in both over- and under-investment in labor, thereby reducing investment efficiency. In addition, we employ augmented models to rule out the possibility of a U-shaped relationship between customer concentration and labor investment efficiency. Furthermore, we adopt the instrumental variables approach as well as a two-stage regression model to address potential endogeneity concerns and mitigate the omitted variable concern. Our results hold after the robustness tests and endogeneity tests. The findings of this paper imply that firms should strategically diversify their customer bases, thereby reducing their reliance on a few large customers. Simultaneously, governments should actively encourage firms to broaden their customer base. It can help enhance labor investment efficiency by spreading the risks associated with customer concentration. Moreover, it is crucial to acknowledge that substantial customer bargaining power can negatively impact supplier firms. Thus, policymakers should promote antitrust regulations and fair trade practices to mitigate the high bargaining power of large customers.

Digital transformation and corporate labor investment efficiency

This study investigates whether and how digital transformation affects corporate labor investment efficiency. Based on a sample of Chinese listed firms from 2008 to 2020, this paper finds that digital transformation increases corporate labor investment efficiency. Our results still hold after using a series of robustness checks. Mechanism tests show that reducing agency problems and mitigating financing restrictions are potential channels through which digital transformation improves corporate labor investment efficiency. Further analyses reveal that digital transformation reduces both overinvestment and underinvestment in labor. Distinguishing different digital technologies, we find that artificial intelligence, big data, cloud computing technology, as well as digital technology applications improve corporate labor investment efficiency, while the impact of blockchain technology is insignificant. In addition, digital transformation's positive effect on corporate labor investment efficiency is more pronounced for firms in non-labor-intensive industries, private firms, and those with more highly skilled labor. Overall, this study deepens our understanding of digital transformation's governance role in improving corporate labor investment efficiency.

Board independence, CEO tenure, and private firm performance in Nairobi, Kenya

Governing board members includes a mix of non-executive and executive members who seek the best interests of shareholders. Non-executive board members relay on independence to execute their responsibilities and enables better firms’ performance. The independent board members are vetted in by shareholders to reduce agency problems. The study aims to establish how Chief executive officer tenure influence independent board members on decision making to enhance firm performance. Agency theory and stewardship theory were utilized in the study. The explanatory research design was used 371 private firms were the sample size. Data was collected using structured questionnaires. Hierarchical multiple regression models were used to test for direct effect and moderation effect. According to the findings, board member independence is critical for monitoring the CEO and reducing principal-agent conflict, hence enhancing business performance. The independence of board members is critical for organizations to remain inventive and competitive in order to improve firm performance.

The Influence Of Risk Management Committee And Family Ownership With Company Performance In Indonesia: Busy Directors As Moderating Variable

Corporate risk management and corporate governance have become important in managing the company. Both are believed to be able to reduce agency problems, between company owners and managers or between shareholders. Using a panel data regression analysis model, a sample of 602 non-financial public companies registered in Indonesia in the 2019-2021 period, this study focused on testing the effect of the existence of the Risk Management Committee and family share ownership on company performance ( ROA). The study also used busy directors as a moderating variable. The results showed that the existence of the Risk Management Committee had a positive and significant relationship with ROA. But family ownership has a negative and significant relationship with ROA. Meanwhile, the presence of commissioners who concurrently hold positions in other companies at once or busy directors, does not significantly affect the relationship between the Risk Management Committee and family ownership and the company's performance.

The effect of applying joint auditing in reducing agency problems: Applied research in private joint stock companies / Khaleeji Commercial Bank

هدفت هذه الدراسة الى اختيار اثر تطبيق التدقيق المشترك في تخفيض مشاكل الوكالة وذلك باختيار اكثر من مراقب حسابات مشتركين في عملية التدقيق بأسلوب التدقيق المشترك وهو احد اساليب التدقيق حيث يكلف اثنين من مراقبي الحسابات مستقلين بتدقيق البيانات المالية واصدار تقريراً مشتركاً يكونان مسئولان عنه مسؤولية تضامنية مشتركة حيث ظهر هذا النوع في كثير من البلدان في الفترة الاخيرة خاصتاً بعد الازمات المالية العالمية الاخيرة من اجل استعادة ثقه مستخدمي هذه التقارير واستناداً الى نظرية الوكالة فان الادارة تسعى الى استغلال الصلاحيات الممنوحة لها للإظهار الجوانب الايجابية عن الادارة تلك الشركات والظهور امام المالكين بالوضع الجيد مستغلين المرونة بالمعايير المحاسبية اضافة الى الاهتمام بالمصالح الشخصية على حساب الملاك ولغرض الحد من هذه الممارسات والافعال يجب اتباع عدة اليات من قبل المالكين للحد من تضارب المصالح بين المدراء والمالكين والحد من التلاعب بالسياسات المالية والمحاسبية وأحد هذه الاليات هو التدقيق المشترك حيث يهدف هذا البحث الى بيان أثر تطبيق التدقيق المشترك في الحد من مشاكل الوكالة

The Agency Problem: Examining the Dilemma Between Shareholder and CEO Bonus Structures

The principal-agent problem is a well-known issue that arises when one party hires another party to act on their behalf, but the interests of the two parties are not perfectly aligned. When there is information imbalance between the principal and the agent, or when one party has more or better information than the other, this frequently occurs. The principal-agent dilemma in relation to information asymmetry is the main topic of this essay, which is a pervasive issue in various industries and has significant impacts on firm performance and dividend policies. By analyzing and synthesizing previous literature, the paper identifies that agency problems can lead to moral hazard and agency-costs-related issues, which in turn can negatively affect the financial outcomes of the firm. To tackle these problems, the paper proposes three potential solutions, equity incentives and debts, external auditors and consultants, and ownership and board structure. These solutions are effective in reducing agency problems. Moreover, the paper discusses how these solutions can be tailored to different contexts and industries. The proposed solutions can effectively alleviate agency problems, but they need to be implemented appropriately and tailored to specific contexts. To investigate the viability and efficacy of these solutions in various contexts, more study is required.

Mediation Effects of Financial Performance between Assets Utilization and the Market Value of Palestinian Listed Firms

Purpose: This paper examines the impact of asset utilization on the firm's market value and the mediating role of financial performance on a sample of non-financial sectors listed on the Palestinian stock exchange from 2010 to 2018. Design/methodology/approach: This study uses a quantitative research approach as it incorporates financial varia-bles, including assets utilization, financial performance (ROA), market value, growth opportunities, firm size, and debt ratio. Findings: The analysis indicates that asset utilization enhances the financial performance of firms and, in turn, the market value of firms. Thus, financial performance mediates the relationship between asset utilization and the firm's market value. Additionally, the growth opportunities and the firm's size positively and directly affect the financial performance. It also indirectly impacts the market value of the firm. In contrast, the debt ratio has a negative impact on financial performance and market value. Generally, these findings are aligned with Signalling and Agency Theories predictions in light of weak corporate governance and high concentration ownership in Palestine and investors' concerns regarding wasting firm assets, unless it enhances the firm's financial performance. Research limitations/implications: This study was conducted using a sample of non-financial Palestinian sectors. Thus, future studies may examine factors included in this study on Palestinian financial industries to generalize findings for the Palestinian market. Additionally, this study used share prices to measure the market value of firms and return on assets as a measure of financial performance. Thus, future studies may consider other criteria, such as price to book value (to gauge whether a stock is valued correctly. Originality/value: Palestine is one of the countries in MENA region that has unclear effects of asset utilization on firm's performance. Accordingly, this study highlights investors' fear regarding mismanagement related to the utilization of a firm's assets, particularly where there is a negative relationship between asset utilization and market value but a positive impact on financial performance. This paper provides a clear empirical evidence on how the asset utilization could be utilized in such market to reduce agency problem and to signal quality management to the outsiders.

Does the Shareholding Proportion of Large Shareholders Affect the Horizontal Organizational Structure? Evidence from Listed Companies in China

ABSTRACT This paper examines how the shareholding proportion of large shareholders affects the horizontal organizational structure of business groups. We empirically find that as the shareholding proportion of large shareholders increases, the number of subsidiaries decreases, which provides evidence of the alignment effect and risk aversion of large shareholders. Our results are robust to various robustness tests. The mechanism tests further verify the alignment effect and risk aversion of large shareholders, showing that as ownership becomes more concentrated, large shareholders tend to reduce agency problems and avoid risks. This study enhances the understanding of horizontal expansion in pyramidal organizational structures.

Ownership concentration and cost of equity in Pakistan: the moderating role of disclosure and governance quality

PurposeThe purpose of this study is to examine the relationship between the ownership concentration and cost of equity of firms in Pakistan context. Moreover, this study also investigates how the presence of disclosure quality and governance quality affects the relationship between ownership concentration and the cost of equity of firms.Design/methodology/approachData are collected from six non-financial sectors listed on Pakistan Stock Exchange during the period of 2015–2019. This study uses pooled ordinary least square (OLS) method to validate the proposed hypothesis in STATA.FindingsThe study found a positive and significant relationship between ownership concentration and cost of equity. The results also show that better disclosure and governance quality negatively moderates the relationship between ownership concentration and cost of equity.Practical implicationsThe findings of this study will help firm managers to implement a high level of disclosure and governance quality in firms to reduce agency problems which will further help a firm in reducing the firm's cost of equity. Furthermore, this study is valuable for practitioners regarding thinking about the process of designing ownership structures to protect minority shareholders' rights, especially in emerging markets.Originality/valueThe novelty of this study is having better disclosure quality and more board independence members helps firms with higher ownership concentration in reducing the cost of equity.

CORPORATE GOVERNANCE, CORPORATE SOCIAL RESPONSIBILITY, and FIRM RISK: THE CASE OF INDONESIAN-LISTED FIRMS

Implementation of good corporate governance and CSR need to be considered by companies in achieving more firm values. Those value depending on public interpretation, which is affecting to their stock prices. This research aims to proof linkage among corporate governance, CSR, and firm risk by theoretical and practical implications. Regarding theoretical implications, this study provides a model linking corporate governance, CSR, and firm risk. We use a sample data from 262 Indonesia listed firms and 1,252 firm year observations from 2010 to 2015. Our result show firms that adopt better corporate governance have a lower firm risk. Specifically, higher independent managerial ownership will reduce agency problem by combining their interest. Firms that spend high CSR expenses tend to have less volatile stock prices. This research conduct to provide such an information for corporate and investors to consider and analyze corporate governance and CSR in their decision making. Keywords: Corporate Governance; Corporate social responsibility; Firm Risk; Stakeholder Theory

Corporate Governance, Ownership Structure, and Firm Value: Evidence from Indonesia

Firm value is crucial for every company, but agency problems that arise due to conflicts of interest between managers and shareholders can reduce the value of a company. Based on agency theory, one mechanism to reduce agency problems is the implementation of good corporate governance and ownership structures. Therefore, this study aims to predict whether there is an influence between corporate governance and ownership structure on firm value. This research was conducted on companies in the LQ45 index during the 2020-2022 period. Researchers obtained 87 units of analysis which were then analyzed using structural equation modeling (SEM). This study's results are corporate governance has a positive and significant effect on firm value. However, ownership structure does not affect firm value. Future studies can use different samples, extend the observation period, use other indicators to measure each variable, and use a broader framework.

Corporate governance and management accounting to reduce agency conflicts

This paper aims to discover priority alternatives involved in decisional-making processes to reduce agency problems considering Corporate Governance (CG) and Management Accounting (MA) criteria. Using the Multi-Criteria Decision-Making (MCDM) methodology, it is possible to model the hierarchy structure to determine the ranking of decisional priorities using the Analytic Hierarchy Process (AHP) method. CG and MA are the main criteria for decision-making to reduce problems between ownership and capital control. Thus, engaging agents is the first alternative to reduce agency conflicts considering a general approach. Strategic accountability should be a priority to reduce agency problems focusing on CG and confidence is the main variable to consider from the MA standpoint. The research provides a multiple criteria system to reduce agency problems in decision-making. This work contributes to information asymmetry’s minimization and has implications on value preservation and creation for stakeholders. The decisional structure and the alternatives related to CG and MA have direct practical applications for managers and actors involved in business decisions to reduce agency conflicts. This paper provides evidence on the importance of CG and MA variables to reduce information asymmetry and agency problems and sets out the main priorities in a context of decision making for managers.

SHAREHOLDER ACTIVISM AND PUBLICATION OF ANNUAL GENERAL MEETING MINUTES ONLINE: EVIDENCE FROM MALAYSIAN LISTED COMPANIES

This study primarily examined the role of Minority Shareholder Watch Group (MSWG), regarded as an advocate for shareholder activism in Malaysia, in encouraging management to take actions in shareholders’ interests by making minutes of annual general meeting (AGM) available electronically. Shareholder activism was assessed through companies monitored by the MSWG and through shareholder participation based on percentage of issued shares that voted at the AGM. The paper utilised secondary and proprietary data. Based on a sample of 261 firms that conducted their AGM in 2017, we found that 43% firms disclosed comprehensive AGM minutes, 24% firms only disclosed summary of key matters discussed and for the rest, no AGM minutes were uploaded on their corporate websites. From the sample, 34% of firms were under the radar of the MSWG. We found that firms targeted by MSWG were significantly associated with detailed disclosure of AGM minutes. However, shareholder participation through ownership voted at the AGM did not yield a significant association. The prevalence of controlling blocks in Malaysian firms may contribute to this result. Overall, the result supports the notion that institutionalised shareholder activism is an effective way to reduce agency problems and information asymmetry between controlling shareholders, management and minority shareholders. Finally, the study limitations and direction for future research are briefly discussed.

Tata Kelola Perusahaan Daerah Air Minum (PDAM) Kabupaten Lima Puluh Kota

The government strongly supports the existence of a good governance system, especially in business entities. Good corporate governance is a system that regulates the direction of activities of a company to be carried out, including in setting goals to be achieved and measuring the success of the company's implementation. The implementation of corporate governance reduces agency problems between owners and managers. Good corporate governance can help avoid conflicts of interest between principals and agents. This study aims to see the background of the formation and practice of governance in PDAM Kabupaten Lima Puluh Kota by linking it with agency theory. Processed data is primary data from interviews. The results of the study found that the purpose of establishing a PDAM is that an institution is needed to manage and control the needs of the community in the field of water and an intermediary from the government's responsibility in providing a minimal service system (SPM). And in terms of PDAM governance practices associated with agency theory, there are three themes, namely for the principal intermediary in supervising PDAM Kabupaten Lima Puluh, namely that the supervisory board has complied with the existing rules and regulations. The second point of discussion is about the relationship between the agent and the principal, from the results of the study it was found that the relationship between the principal and agent is in the form of accountability and transparency. And the last topic about corporatization, the results of research on PDAM Kabupaten Lima Puluh Kota, the local government has handed over all authority and management fully to the PDAM management to manage and manage. However, the full handover to local governments will still be controlled and supervised by PDAM activities assisted by the supervisory board

Studi Literatur Determinan Internal Control Disclosure

Effective internal control is of great significance in ensuring the quality of financial reporting, preventing business risk, and achieving sustainable development as well. The aims of this study were to examine the determinants of the Internal Control Disclosure (ICD) that was used in the research and its impact on corporate value. The factors tested in this study were the size of the board of commissioners, the proportion of independent board of commissioners, board of commissioners' meetings, the size of the audit committee, and the audit committee meetings. This study was conducted using content analysis from the annual reports of manufacturing companies in Indonesia from 2012-2016. The study found that the size of the board of commissioners, the proportion of independent board of commissioners, board of commissioners meetings, and audit committee size had a positive effect on the extent of ICS disclosure. Furthermore, the disclosure of ICS has been shown to increase the value of the company. Another finding was that audit committee meetings negatively affect the extent of ICS disclosure. Based on the above findings, it could be concluded that the board of commissioners and audit committees encourage companies to conduct ICS disclosure as a means of reducing agency problems. ICS disclosure proved to be used as a monitoring mechanism used by stakeholders in decision-making related to the company.

Reducing Agency Problem Through Religious Values in Bhagavad Gita

This conceptual paper aims to provide a solution in reducing the agency problem through the implementation of religious values in Bhagavad Gita. The solution offered in this paper is cultivating religious values in the Bhagavad Gita, which includes: carrying out obligations by eliminating lust for the reward obtained, facing sorrow and joy with unanimous determination and eliminating ego. Implementation of these values will minimize the agency costs that may arise. Applying the religious values of the Bhagavad Gita can be a powerful step in reducing the agency problem. Furthermore, when one organization is able to implement it properly, it will become a role model for other organizations especially non-profit organizations. As far as the authors are concerned, there has been no published papers discussing how to reduce agency problem through religious values in Bhagavad Gita.

Female directors and corporate cash holdings in the presence of internal dealings

PurposeInternal dealings might shape female directors’ incentives to affect corporate financial policies. This study aims to explore what impact female directors have on corporate cash holdings in the presence of internal dealings.Design/methodology/approachThe authors apply panel data regressions that allow them to address endogeneity concerns. The initial sample includes all non-financial Spanish listed firms from 2005 to 2019.FindingsConditional on the existence of internal dealings, the authors show that the presence of two or more female directors decreases corporate cash holdings. Results seem consistent, with independent female directors becoming an effective monitoring mechanism for corporate financial policies in the presence of internal dealings. Furthermore, the findings could be explained by independent female directors providing valuable resources and external linkages, which, in the presence of internal dealings, help to reduce the firm’s need to hold cash to cope with external uncertainties.Practical implicationsThe results provide practical implications by suggesting that in the presence of internal dealings, regulators and policy makers should pay greater attention to board gender diversity so as to reduce agency problems associated with free cash flows. The authors also contribute to prior academic debate regarding the importance of female directors in providing critical resources and external linkages to cope with uncertainty and to the importance of considering not only the presence of women on boards but also their number and specific roles.Originality/valueThe authors' work meets the increasing demand for more research on gender diversity to better capture the potential benefits that may result from appointing women on boards. To the best of the authors' knowledge, this is the first study to examine the influence of female directors on corporate cash holdings in the presence of internal dealings.