Determinants of Leverage and Agency Problems: A Regression Approach with Survey Data
AbstractThis paper reports on empirical investigations of the determinants of leverage and agency problems. Use is made of private data obtained through questionnaires, and a regression model is estimated in which leverage and four agency problems are explained, i.e. direct wealth transfer, asset substitution, underinvestment and overinvestment. The application of regression analysis on survey data is novel in finance. Therefore, this paper contains an in-depth description of the research methods. Results for a sample of Dutch firms confirm that the trade-off between tax advantages and bankruptcy costs determines leverage. Free cash flow and corporate governance characteristics appear to be determinants of overinvestment. Despite finding that agency problems are present, no evidence is found for direct relations between leverage and the agency problems.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal The European Journal of Finance.
Volume (Year): 13 (2007)
Issue (Month): 6 ()
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- Mehdi Nekhili & Afifa Wali Siala & Dhikra Chebbi, 2009.
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Working Papers CREGO
1090102, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
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- Christian Dorion & Pascal François & Gunnar Grass & Alexandre Jeanneret, 2014. "Convertible Debt and Shareholder Incentives," Cahiers de recherche 1403, CIRPEE.
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- Ciarán mac an Bhaird & Brian Lucey, 2010. "Determinants of capital structure in Irish SMEs," Small Business Economics, Springer, vol. 35(3), pages 357-375, October.
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