Agency Costs and Ownership Structure
James S. Ang
Florida State University
Rebel A. Cole
Driehaus College of Business at DePaul University
James W Lin
Montana State University - Bozeman - College of Business
Journal of Finance, Vol. 55, No. 1, February 2000
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.
Number of Pages in PDF File: 39
Keywords: agency costs, bank monitoring, ownership structure,
JEL Classification: G32, G34Accepted Paper Series
Date posted: April 23, 2007 ; Last revised: November 3, 2008
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