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Friend or foe? The link between agency cost and financialization in Turkey

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  • Ömer Tuğsal Doruk
  • Bahadır Ergün

Abstract

This study aims to investigate the link between agency cost and financialization in the Turkish manufacturing sector in the period of 1990–2017 with a novel empirical methodology. A two‐step approach has been developed to examine financialization's effect on shareholder value orientation through agency costs. The first step employs a panel stochastic frontier analysis for measuring corporate efficiency, which is an inverse proxy of agency cost. In the second step, the link between financialization and corporate efficiency is investigated using panel data econometric models. The results show that agency cost leads the firms to use financialization instead of real investments.

Suggested Citation

  • Ömer Tuğsal Doruk & Bahadır Ergün, 2023. "Friend or foe? The link between agency cost and financialization in Turkey," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1689-1705, April.
    • Handle: RePEc:wly:mgtdec:v:44:y:2023:i:3:p:1689-1705
    DOI: 10.1002/mde.3776
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