Agency Costs and Ownership Structure in Australia
Continuity Capital Partners
Richard A. Heaney
University of Western Australia; Financial Research Network (FIRN)
Pacific-Basin Finance Journal, Vol. 13, No. 1, pp. 29-52, January 2005
Financial economics often assumes that equity agency costs increase with the separation of ownership and control. This paper tests this relationship using a survey sample of approximately 3800 Australian small and medium enterprises for 1996-7 and 1997-8. Following Ang, Cole and Lin (2000) we estimate a zero equity agency cost benchmark (in terms of operating expenses and asset utilization ratios) for the 100% owner-manager firm. We then examine how agency costs change when ownership and control are separated. We report a positive relationship between equity agency costs and the separation of ownership and control.
Keywords: Equity agency costs, small to medium enterprises (SMEs), owner-managers, separation of control and ownership
JEL Classification: G32Accepted Paper Series
Date posted: October 26, 2005
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