Corporate Governance Mechanisms and Agency Costs: Cross-Country Analysis

Corporate Governance, Vol. 16 No. 2, pp. 347-360, 2016

22 Pages Posted: 5 Dec 2019

See all articles by Tatiana Garanina

Tatiana Garanina

University of Vaasa; Vaasan yliopisto (University of Vaasa)

Elina Kaikova

Norwegian School of Economics (NHH)

Date Written: December 14, 2015

Abstract

Purpose: The aim of the paper is to investigate whether specific corporate governance mechanisms, such as board size, board composition, leverage and firm size, tend to mitigate agency cost occurrence in the USA, Russia and Norway.

Design/methodology: We analyze the sample of 243 US, 196 Russian and 175 Norwegian joint stock companies for the period from 2004 to 2012. We apply the regression analysis to test the models.

Research Findings: We reveal that larger boards increase agency costs (measured by asset utilization ratio and the asset liquidity ratio) in all sample companies. The proportion of female members has a very slight positive effect in US companies, a negative influence on agency costs in the Norwegian sample and is not significant in the Russian market. We find that the big Russian and US companies in our samples have lower agency costs.

Theoretical/Academic Implications: The paper extends the stream of agency research by introducing new markets: emerging Russian and Norwegian. The study adds information to the ongoing debate on whether bigger or smaller board size constitutes a strong corporate governance mechanism. By adding the proportion of women in the boardroom we extended the research devoted to the gender diversity issue.

Practitioner Implications: Considering that the analyzed markets represent significant distinguishing features in their institutional framework, the results of the paper show which agency-mitigation mechanisms work more effectively in companies operating in the analyzed countries characterized by specific corporate governance models.

Originality: The main contribution of this paper to the empirical literature is that it extends the stream of agency research by introducing new, emerging markets: represented by Scandinavian (depicted by the Norwegian sample) and Russian companies. Considering that each market – US, Norwegian and Russian – represents significant distinguishing features in their institutional framework, the paper provides an important research setting in which corporate governance mechanisms can be analyzed from the perspective of a country’s peculiar characteristics. Unlike other agency cost studies, we accounted for the gender diversity component in the companies and contribute to gender-diversity issues.

Keywords: corporate governance mechanisms, agency costs, gender diversity, board size, cross-country analysis

Suggested Citation

Garanina, Tatiana and Garanina, Tatiana and Kaikova, Elina, Corporate Governance Mechanisms and Agency Costs: Cross-Country Analysis (December 14, 2015). Corporate Governance, Vol. 16 No. 2, pp. 347-360, 2016, Available at SSRN: https://ssrn.com/abstract=3489966

Tatiana Garanina (Contact Author)

University of Vaasa ( email )

P.O. Box 700
Wolffintie 34
Vaasa, FI-65101
Finland

Vaasan yliopisto (University of Vaasa) ( email )

P.O. Box 700
P.O. Box 700
Vaasa, FI-65101
Finland

Elina Kaikova

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

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