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Agency Conflicts Around the World

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  • Erwan Morellec

    (EPFL and Swiss Finance Institute)

  • Boris Nikolov

    (EPFL, University of Lausanne and Swiss Finance Institute)

  • Norman Schürhoff

    (EPFL, University of Lausanne and Swiss Finance Institute)

Abstract

We use a dynamic model of financing decisions to quantify agency conflicts across legal and institutional environments and decompose their effects into wealth transfers among stakeholders and value losses from policy distortions. Our estimates show that agency costs are large and vary widely across and within countries. Legal origin and provisions for investor protection affect agency costs, but they are more relevant for curtailing governance excesses than guarding the typical firm. Agency costs split about equally into wealth transfers and value losses from policy distortions, the latter being larger where ownership is dispersed. Incentive misalignment captures 60% of country variation in leverage.

Suggested Citation

  • Erwan Morellec & Boris Nikolov & Norman Schürhoff, 2015. "Agency Conflicts Around the World," Swiss Finance Institute Research Paper Series 15-21, Swiss Finance Institute, revised Apr 2016.
    • Handle: RePEc:chf:rpseri:rp1521
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    More about this item

    Keywords

    Capital structure; agency conflicts; corporate governance; structural estimation;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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