Security Analysis, Agency Costs and Firm Characteristics

24 Pages Posted: 18 Apr 2000

See all articles by John A. Doukas

John A. Doukas

Old Dominion University - Strome College of Business

Chansog (Francis) Kim

The State University of New York at Stony Brook

Christos Pantzalis

University of South Florida

Multiple version iconThere are 2 versions of this paper

Date Written: March 17, 2000

Abstract

In this paper we appraise the monitoring activity of security analysis from the manager-shareholder conflict perspective. Using a data set of more than 7,000 firm-year observations for manufacturing firms tracked by security analysts over the 1988-1994 period, our evidence supports the view that security analysis acts as a monitoring mechanism in reducing agency costs associated with the separation of ownership and control. However, we also find that security analysts are more effective in reducing managerial non-value maximizing behavior for single- (focused) than multi-segment (diversified) firms. In addition, the shareholder gains from the monitoring activity of security analysis are larger for focused than diversified firms.

JEL Classification: G34

Suggested Citation

Doukas, John A. and Kim, Chansog (Francis) and Pantzalis, Christos, Security Analysis, Agency Costs and Firm Characteristics (March 17, 2000). Available at SSRN: https://ssrn.com/abstract=223512 or http://dx.doi.org/10.2139/ssrn.223512

John A. Doukas (Contact Author)

Old Dominion University - Strome College of Business ( email )

2080 Constant Hall
Suite 2080
Norfolk, VA 23529-0222
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757-683-5521 (Phone)

HOME PAGE: http://www.efmaefm.org/0DOUKAS/doukas.php

Chansog (Francis) Kim

The State University of New York at Stony Brook ( email )

College of Business
Stony Brook, NY 11794
United States
5163040037 (Phone)
631-632-9412 (Fax)

Christos Pantzalis

University of South Florida ( email )

Tampa, FL 33620-5500
United States
(813) 974-3262 (Phone)

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