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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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  1. Lotta Väänänen, 2003. "Agency Costs and R&D: Evidence from Finnish SMEs," Discussion Papers 859, The Research Institute of the Finnish Economy. [Downloadable!]
  2. Jacky Yuk-Chow So, 2005. "Agency* Costs And Ownership Structure: Evidence From The Small Business Finance Survey Data Base," The Office of Advocacy Small Business Working Papers 05jys, U.S. Small Business Administration, Office of Advocacy. [Downloadable!]
  3. Antti-Jussi Tahvanainen, 2003. "The Capital Structure of Finnish Biotechnology SMEs - An empirical analysisi," Discussion Papers 864, The Research Institute of the Finnish Economy. [Downloadable!]
  4. Allen N. Berger & Emilia Bonaccorsi di Patti, 2002. "Capital structure and firm performance: a new approach to testing agency theory and an application to the banking industry," Finance and Economics Discussion Series 2002-54, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  5. Jennifer Dlugosz & Rudiger Fahlenbrach & Paul Gompers & Andrew Metrick, 2004. "Large Blocks of Stock: Prevalence, Size, and Measurement," NBER Working Papers 10671, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Muhammad Azeem Qureshi & Toseef Azid, 2006. "Did They Do It Differently? Capital Structure Choices of Public and Private Sectors in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(4), pages 701-709. [Downloadable!]
  7. Pattanayak, Manoranjan, 0001. "Insider Ownership and Firm Value:Evidence from Indian Corporate Sector," MPRA Paper 2870, University Library of Munich, Germany. [Downloadable!]
  8. Maria-Teresa Marchica, . "Debt Maturity and the Characteristics of Ownership Structure: An Empirical Investigation of UK Firms," Discussion Papers 05/29, Department of Economics, University of York. [Downloadable!]
  9. Müller, Elisabeth, 2004. "Underdiversification in Private Companies : Required Returns and Incentive Effects," ZEW Discussion Papers 04-29, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  10. Raine Hermans, 2004. "Finance of Small Bio-pharmaceutical Industry in Finland - Descriptive Analysis," Discussion Papers 888, The Research Institute of the Finnish Economy. [Downloadable!]
  11. Lisa Barrow & Cecilia Elena Rouse, 2000. "Using market valuation to assess the importance and efficiency of public school spending," Working Paper Series WP-00-4, Federal Reserve Bank of Chicago. [Downloadable!]
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  12. Jordan Siegel & Felix Oberholzer-Gee, 2007. "Expropriators or Turnaround Artists? The Role of Controlling Families in South Korea," CEI Working Paper Series 2006-19, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  13. Sinclair Davidson & Robert Brooks, 2004. "R&D, Agency Costs and Capital Structure: International Evidence," Econometric Society 2004 Australasian Meetings 59, Econometric Society. [Downloadable!]
  14. Joseph P. Hughes & Choon-Geol Moon, 2004. "Estimating managers' utility-maximizing demand for agency goods," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 320-352. [Downloadable!]
  15. Raine Hermans & Antti-Jussi Tahvanainen, 2002. "Ownership and Financial Structure of Biotechnology SMEs: Evidence from Finland," Discussion Papers 835, The Research Institute of the Finnish Economy. [Downloadable!]
  16. Robert R. Bliss & Mark J. Flannery, 2000. "Market discipline in the governance of U.S. Bank Holding Companies: monitoring vs. influencing," Working Paper Series WP-00-3, Federal Reserve Bank of Chicago. [Downloadable!]
  17. Müller, Elisabeth, 2005. "How Does Owners’ Exposure to Idiosyncratic Risk Influence the Capital Structure of Private Companies?," ZEW Discussion Papers 05-14, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  18. Malika HAMADI, 2002. "Ownership Strucure ad the Performance of Belgian Listed Firms," Discussion Papers 2002015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  19. Elisabeth Mueller & Alexandra Spitz, 2002. "Managerial Ownership and Firm Performance in German Small and Medium-Sized Enterprises," CEP Discussion Papers 0528, Centre for Economic Performance, LSE. [Downloadable!]
  20. Chrisostomos Florackis & Aydin Ozkan, 2006. "What Reduces the Impact of Managerial Entrenchment on Agency Costs? Evidence for UK Firms," Discussion Papers 06/03, Department of Economics, University of York. [Downloadable!]
  21. 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!]
  22. Pant, Manoj & Pattanayak, Manoranjan, 2007. "Corporate Governance and Firm performance in India
    [Insider Ownership and Firm value: Evidence from Indian Corporate Sector]    ," MPRA Paper 6335, University Library of Munich, Germany. [Downloadable!]
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