IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Agency Costs and the Long-Run Performance of Debt Issuers

  • Yusnidah Ibrahim

    ()

    (College of Business, Universiti Utara Malaysia, 06010 UUM Sintok, Kedah)

  • Md Mohan Uddin

    (College of Business, Universiti Utara Malaysia, 06010 UUM Sintok, Kedah)

  • Kamarun Nisham Taufil Mohd

    (College of Business, Universiti Utara Malaysia, 06010 UUM Sintok, Kedah)

  • Mohd Sobri Minai

    (College of Business, Universiti Utara Malaysia, 06010 UUM Sintok, Kedah)

Registered author(s):

    This study focuses on an agency cost explanation of the long-run performance of debt issuers based on debt issuance data in Malaysia during the period from January 2001 to October 2009. L ong-run performance is measured by buy and hold abnormal return (BHAR), while growth opportunities (GO), managerial ownership (MO), ownership concentration (OC) and free cash flow (FCF) are adopted as proxies for agency costs. Using a linear regression method, this study finds that BHAR is positively influenced by GO and OC but negatively influenced by MO and FCF, which supports an agency cost explanation of capital structure. An improvement in the performance of debt issuers is found to be associated with the monitoring of debt by debt issuers. Debt issuers with more concentrated ownership and lower MO benefit from the issuance of debt through a reduction of agency costs.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://web.usm.my/journal/aamjaf/vol%209-1-2013/Art%204%20%2867-87%29.pdf
    Download Restriction: no

    Article provided by Penerbit Universiti Sains Malaysia in its journal Asian Academy of Management Journal of Accounting and Finance.

    Volume (Year): 9 (2013)
    Issue (Month): 1 ()
    Pages: 67-87

    as
    in new window

    Handle: RePEc:usm:journl:aamjaf00901_67-87
    Contact details of provider: Web page: http://web.usm.my/aamj/

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Mitchell, Mark L & Stafford, Erik, 2000. "Managerial Decisions and Long-Term Stock Price Performance," The Journal of Business, University of Chicago Press, vol. 73(3), pages 287-329, July.
    2. Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
    3. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    4. Ritter, Jay R, 1991. " The Long-run Performance of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(1), pages 3-27, March.
    5. Jan Bena & Jan Hanousek, 2008. "Rent Extraction by Large Shareholders: Evidence Using Dividend Policy in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(03-04), pages 106-130, May.
    6. Yilei Zhang, 2009. "Are Debt and Incentive Compensation Substitutes in Controlling the Free Cash Flow Agency Problem?," Financial Management, Financial Management Association International, vol. 38(3), pages 507-541, 09.
    7. John S. Earle & Csaba Kucsera & Almos Telegdy, 2003. "Ownership Concentration and Corporate Performance on the Budapest Stock Exchange: Do Too Many Cooks Spoil the Goulash?," Upjohn Working Papers and Journal Articles 03-93, W.E. Upjohn Institute for Employment Research.
    8. Chan, Konan & Ikenberry, David & Lee, Inmoo, 2004. "Economic Sources of Gain in Stock Repurchases," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(03), pages 461-479, September.
    9. Wu, Congsheng & Kwok, Chuck C.Y., 2007. "Long-run performance of global versus domestic initial public offerings," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 609-627, March.
    10. Hoje Jo & Yongtae Kim, 2008. "Ethics and Disclosure: A Study of the Financial Performance of Firms in the Seasoned Equity Offerings Market," Journal of Business Ethics, Springer, vol. 80(4), pages 855-878, July.
    11. Eugene F. Fama, 2002. "Testing Trade-Off and Pecking Order Predictions About Dividends and Debt," Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 1-33, March.
    12. Cécile Carpentier, 2006. "The valuation effects of long-term changes in capital structure," International Journal of Managerial Finance, Emerald Group Publishing, vol. 2(1), pages 4-18, January.
    13. Howe, John S. & Lee, Hongbok, 2006. "The long-run stock performance of preferred stock issuers," Review of Financial Economics, Elsevier, vol. 15(3), pages 237-250.
    14. Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
    15. Deesomsak, Rataporn & Paudyal, Krishna & Pescetto, Gioia, 2004. "The determinants of capital structure: evidence from the Asia Pacific region," Journal of Multinational Financial Management, Elsevier, vol. 14(4-5), pages 387-405.
    16. Aydin Ozkan, 2001. "Determinants of Capital Structure and Adjustment to Long Run Target: Evidence From UK Company Panel Data," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(1-2), pages 175-198.
    17. Tehmina Khan, 2006. "Company Dividends and Ownership Structure: Evidence from UK Panel Data," Economic Journal, Royal Economic Society, vol. 116(510), pages C172-C189, 03.
    18. Lee, Inmoo & Loughran, Tim, 1998. "Performance following convertible bond issuance," Journal of Corporate Finance, Elsevier, vol. 4(2), pages 185-207, June.
    19. Jerry Coakley & Leon Hadass & Andrew Wood, 2008. "Hot IPOs can damage your long-run wealth!," Applied Financial Economics, Taylor & Francis Journals, vol. 18(14), pages 1111-1120.
    20. De-Wai Chou & C. Edward Wang & Sheng-Syan Chen & Sandra Tsai, 2009. "Earnings Management and the Long-Run Underperformance of Firms Following Convertible Bond Offers," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(1-2), pages 73-98.
    21. Sudip Datta & Mai Iskandar-Datta & Ajay Patel, 2000. "Some Evidence on the Uniqueness of Initial Public Debt Offerings," Journal of Finance, American Finance Association, vol. 55(2), pages 715-743, 04.
    22. Frank, Murray Z. & Goyal, Vidhan K., 2009. "Capital Structure Decisions: Which Factors are Reliably Important?," MPRA Paper 22525, University Library of Munich, Germany.
    23. Ilia D. Dichev & Joseph D. Piotroski, 1999. "The Performance of Long-run Stock Returns Following Issues of Public and Private Debt," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 26(9-10), pages 1103-1132.
    24. Autore, Don M. & Bray, David E. & Peterson, David R., 2009. "Intended use of proceeds and the long-run performance of seasoned equity issuers," Journal of Corporate Finance, Elsevier, vol. 15(3), pages 358-367, June.
    25. Datta, Sudip & Iskandar-Datta, Mai & Raman, Kartik, 2000. "Debt Structure Adjustments and Long-Run Stock Price Performance," Journal of Financial Intermediation, Elsevier, vol. 9(4), pages 427-453, October.
    26. Erik Lie, 2002. "Do Firms Undertake Self-Tender Offers to Optimize Capital Structure?," The Journal of Business, University of Chicago Press, vol. 75(4), pages 609-640, October.
    27. Sreedhar T. Bharath & Paolo Pasquariello & Guojun Wu, 2009. "Does Asymmetric Information Drive Capital Structure Decisions?," Review of Financial Studies, Society for Financial Studies, vol. 22(8), pages 3211-3243, August.
    28. Jegadeesh, Narasimhan & Karceski, Jason, 2009. "Long-run performance evaluation: Correlation and heteroskedasticity-consistent tests," Journal of Empirical Finance, Elsevier, vol. 16(1), pages 101-111, January.
    29. Stewart C. Myers, 2001. "Capital Structure," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 81-102, Spring.
    30. Moshirian, Fariborz & Ng, David & Wu, Eliza, 2010. "Model specification and IPO performance: New insights from Asia," Research in International Business and Finance, Elsevier, vol. 24(1), pages 62-74, January.
    31. Lins, Karl V., 2003. "Equity Ownership and Firm Value in Emerging Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(01), pages 159-184, March.
    32. Howton, Shawn D & Howton, Shelly W & Perfect, Steven B, 1998. "The Market Reaction to Straight Debt Issues: The Effects of Free Cash Flow," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 21(2), pages 219-28, Summer.
    33. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:usm:journl:aamjaf00901_67-87. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journal Division)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.