Agency Costs and Ownership Structure
Top Cited Papers
- 1 February 2000
- journal article
- research article
- Published by Wiley in The Journal of Finance
- Vol. 55 (1) , 81-106
- https://doi.org/10.1111/0022-1082.00201
Abstract
We provide measures of absolute and relative equity agency costs for corporations under different ownership and management structures. Our base case is Jensen and Meckling's (1976) zero agency‐cost firm, where the manager is the firm's sole shareholder. We utilize a sample of 1,708 small corporations from the FRB/NSSBF database and find that agency costs (i) are significantly higher when an outsider rather than an insider manages the firm; (ii) are inversely related to the manager's ownership share; (iii) increase with the number of nonmanager shareholders, and (iv) to a lesser extent, are lower with greater monitoring by banks.Keywords
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