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Agency Costs and Ownership Structure

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Author Info
James S. Ang (Florida State University,)
Rebel A. Cole (The University of Auckland, New Zealand,)
James Wuh Lin (Montana State University)

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Abstract

We provide measures of absolute and relative equity agency costs for corporations under different ownership and management structures. Our base case is Jensen and Meckling's (1976) zero agency-cost firm, where the manager is the firm's sole shareholder. We utilize a sample of 1,708 small corporations from the FRB/NSSBF database and find that agency costs (i) are significantly higher when an outsider rather than an insider manages the firm; (ii) are inversely related to the manager's ownership share; (iii) increase with the number of nonmanager shareholders, and (iv) to a lesser extent, are lower with greater monitoring by banks. Copyright The American Finance Association 2000.

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Publisher Info
Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 55 (2000)
Issue (Month): 1 (02)
Pages: 81-106
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Handle: RePEc:bla:jfinan:v:55:y:2000:i:1:p:81-106

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  21. Malika HAMADI, 2002. "Ownership Strucure ad the Performance of Belgian Listed Firms," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
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  23. Hoffmann, Arvid O.I. & Pennings, Joost M.E., 2008. "Shareholder Activism and the Role of Marketing: A Framework for Analyzing and Managing Investor Relations," Research Memoranda 007, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
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