AN INVESTIGATION ON THE RELATIONSHIP BETWEEN CORPORATE GOVERNANCE MECHANISMS AND AGENCY COSTS AMONG LISTED FIRMS OF TEHRAN STOCK EXCHANGE

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NOURAVESH I.; KARAMI GH.R.; VAFI SANI J.

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Paper Information

Journal: JOURNAL OF ACCOUNTING AND AUDITING RESEARCHES (ACCOUNTING RESEARCH) Year:2009 | Volume:1 | Issue:1 Page(s): 4-27

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Title

AN INVESTIGATION ON THE RELATIONSHIP BETWEEN CORPORATE GOVERNANCE MECHANISMS AND AGENCY COSTS AMONG LISTED FIRMS OF TEHRAN STOCK EXCHANGE

Author(s)

NOURAVESH I. | KARAMI GH.R. | VAFI SANI J. | Issue Writer Certificate

Keywords

AGENCY COSTSQ2

FREE CASH FLOWSQ3

CORPORATE GOVERNANCEQ3

INSTITUTIONAL OWNERSHIPQ3

NON-EXECUTIVE DIRECTORQ3

Abstract

This study examines the impacts of CORPORATE GOVERNANCE mechanisms on AGENCY COSTS among firms listed on Tehran stock exchange. Agency relationship is a contract under which a principal engages an agent to perform some operations, and also delegates some decision making authority to him in this way. By forming agency relationship, AGENCY COSTS, arising from conflict of interests between parties are generated. AGENCY COSTS have an inverse impact on the firm's value; firms, therefore, are about to control and mitigate such costs. In our study, AGENCY COSTS are defined as the interaction of the firm's growth prospects and its FREE CASH FLOWS. We used Tobin's Q as a proxy for the firm's growth prospects. Among AGENCY COSTS mitigating mechanisms, INSTITUTIONAL OWNERSHIP, percentage of nonexecutive directors, and debt ratio are used as independent variables. We also tested hypotheses using a pooled cross-sectional OLS regression. Our study provides evidence on a negative and significant relation between percentage of NON-EXECUTIVE DIRECTORs and AGENCY COSTS of the firm. Also the same relation is observed between levels of INSTITUTIONAL OWNERSHIP and the firm's AGENCY COSTS. Furthermore, our findings were inconsistent with the hypothesis that there is a relation between the firm's debt ratio and its AGENCY COSTS.

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APA: Copy

NOURAVESH, I., KARAMI, GH.R., & VAFI SANI, J.. (2009). AN INVESTIGATION ON THE RELATIONSHIP BETWEEN CORPORATE GOVERNANCE MECHANISMS AND AGENCY COSTS AMONG LISTED FIRMS OF TEHRAN STOCK EXCHANGE. JOURNAL OF ACCOUNTING AND AUDITING RESEARCHES (ACCOUNTING RESEARCH), 1(1), 4-27. SID. https://sid.ir/paper/157309/en

Vancouver: Copy

NOURAVESH I., KARAMI GH.R., VAFI SANI J.. AN INVESTIGATION ON THE RELATIONSHIP BETWEEN CORPORATE GOVERNANCE MECHANISMS AND AGENCY COSTS AMONG LISTED FIRMS OF TEHRAN STOCK EXCHANGE. JOURNAL OF ACCOUNTING AND AUDITING RESEARCHES (ACCOUNTING RESEARCH)[Internet]. 2009;1(1):4-27. Available from: https://sid.ir/paper/157309/en

IEEE: Copy

I. NOURAVESH, GH.R. KARAMI, and J. VAFI SANI, “AN INVESTIGATION ON THE RELATIONSHIP BETWEEN CORPORATE GOVERNANCE MECHANISMS AND AGENCY COSTS AMONG LISTED FIRMS OF TEHRAN STOCK EXCHANGE,” JOURNAL OF ACCOUNTING AND AUDITING RESEARCHES (ACCOUNTING RESEARCH), vol. 1, no. 1, pp. 4–27, 2009, [Online]. Available: https://sid.ir/paper/157309/en

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