Do Shareholder Coalitions Affect Agency Costs? Evidence from Italian Listed Companies

Research in International Business and Finance, Forthcoming

Posted: 2 Mar 2018

See all articles by Fabrizio Rossi

Fabrizio Rossi

University of Cassino and Southern Lazio

James R. Barth

Auburn University; Milken Institute

Richard J. Cebula

Armstrong Atlantic State University; Jacksonville University (Florida)

Date Written: February 21, 2018

Abstract

This study investigates the relationship between agency costs and ownership structure for a sample of listed Italian companies to determine the impact of shareholder coalitions on agency costs. Using a balanced panel dataset of 1,956 firm-year observations for the period 2002−2013, the results provide evidence that ownership concentration and debt play a limited role in monitoring agency costs, whereas the type of shareholder plays an important role in either mitigating or exacerbating agency costs. Family-controlled firms and coalitions among non-controlling shareholders seem helpful in reducing agency costs. The results suggest that coalitions among non-controlling shareholders both in family and non-family firms reduce agency costs. The findings also indicate that multiple blockholders play a key role as mediators. The paper provides a new perspective on assessing the role of agency costs in a bank-based, civil law country. The results enable one to better understand the impact of blockholders on agency costs and their interactions within family-controlled firms. The results also provide support for both the entrenchment effect and the alignment-of-interests hypothesis.

Keywords: agency theory; debt; ownership structure; multiple blockholders; family-controlled firms; GMM estimation

JEL Classification: G32; G34

Suggested Citation

Rossi, Fabrizio and Barth, James R. and Cebula, Richard J., Do Shareholder Coalitions Affect Agency Costs? Evidence from Italian Listed Companies (February 21, 2018). Research in International Business and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3127440

Fabrizio Rossi (Contact Author)

University of Cassino and Southern Lazio ( email )

Via G. Di Biasio, 43
Cassino, Frosinone 03043
Italy

James R. Barth

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States
334-844-2469 (Phone)
334-844-4960 (Fax)

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States

Richard J. Cebula

Armstrong Atlantic State University ( email )

11935 Abercorn Street
Savannah, GA 31419
912-921-3781 (Phone)
912-921-3782 (Fax)

Jacksonville University (Florida) ( email )

Jacksonville, FL 32211
United States

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