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Agency costs, ownership structure and corporate governance compliance: A private contracting perspective


  • Henry, Darren


This paper examines whether the adoption of specific corporate governance practices, and, in particular, adherence to an overall code of governance practice, is associated with agency cost benefits for companies listed on the Australian Securities Exchange (ASX). Using a private and voluntary contracting setting, the adoption of individual corporate governance attributes is found to have no influence on firm-level agency costs, whereas greater compliance with an overall governance index variable representative of the ASX Corporate Governance Council requirements now in force results in significantly lower agency costs. The beneficial influence of voluntary governance compliance on agency costs is also found to be independent of firm ownership structure, with these findings having a range of implications for firms both in Australia and globally.

Suggested Citation

  • Henry, Darren, 2010. "Agency costs, ownership structure and corporate governance compliance: A private contracting perspective," Pacific-Basin Finance Journal, Elsevier, vol. 18(1), pages 24-46, January.
  • Handle: RePEc:eee:pacfin:v:18:y:2010:i:1:p:24-46

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    References listed on IDEAS

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    Cited by:

    1. Pascal Nguyen & Nahid Rahman, 2015. "Which governance characteristics affect the incidence of divestitures in Australia?," Australian Journal of Management, Australian School of Business, vol. 40(2), pages 351-374, May.
    2. Ozlem KUTLU FURTUNA, 2016. "The Nexus between Discretionary Expenditures and Corruption: Industry Level Perspectives from BRIC and Turkey," Proceedings of Business and Management Conferences 4406932, International Institute of Social and Economic Sciences.
    3. Ji, Xu (Jane) & Boyle, Glenn, 2011. "New Zealand Corporate Boards in Transition: Composition, Activity and Incentives Between 1995 and 2010," Working Paper Series 4105, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    4. Sofi Mohd Fikri & Mohamed Hisham Yahya & Taufiq Hassan, 2017. "A Review on Agency Cost of Shariah Governance in Mutual Fund," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 530-538.
    5. Namazi, Mohammad & Shokrolahi, Ahmad & Sadeghzadeh Maharluie, Mohammad, 2016. "Detecting and ranking cash flow risk factors via artificial neural networks technique," Journal of Business Research, Elsevier, vol. 69(5), pages 1801-1806.
    6. P. Krishna Prasanna & Anish S. Menon, 2012. "Corporate governance and stock market liquidity in India," International Journal of Behavioural Accounting and Finance, Inderscience Enterprises Ltd, vol. 3(1/2), pages 24-45.
    7. repec:eco:journ1:2017-03-17 is not listed on IDEAS
    8. Theeravanich, Amnaj, 2013. "Director compensation in emerging markets: A case study of Thailand," Journal of Economics and Business, Elsevier, vol. 70(C), pages 71-91.
    9. repec:eee:jebusi:v:93:y:2017:i:c:p:1-14 is not listed on IDEAS
    10. repec:jso:coejbm:v:5:y:2017:i:3:p:131-152 is not listed on IDEAS
    11. Afzalur Rashid, 2016. "Managerial Ownership and Agency Cost: Evidence from Bangladesh," Journal of Business Ethics, Springer, vol. 137(3), pages 609-621, September.
    12. Jiraporn, Pornsit & Kim, Jang-Chul & Kim, Young Sang & Kitsabunnarat, Pattanaporn, 2012. "Capital structure and corporate governance quality: Evidence from the Institutional Shareholder Services (ISS)," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 208-221.
    13. Wang, Li-Hsun & Lin, Chu-Hsiung & Fung, Hung-Gay & Chen, Hsien-Ming, 2015. "Governance mechanisms and downside risk," Pacific-Basin Finance Journal, Elsevier, vol. 35(PB), pages 485-498.


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