Empirical Test of Balancing Model of Agency Costs, Contracting Model of Agency Theory, Collateral, and Growth Hypothesis in Indonesian Capital Market

25 Pages Posted: 31 Jan 2005  

Putu Anom Mahadwartha

Faculty of Business and Economics, Universitas Surabaya ; Center for Asia Studies

Date Written: September 2002

Abstract

The paper analyzes the relationship between managerial ownership with leverage policy and dividend policy (balancing model of agency theory) and interdependency of dividend and leverage (contracting model of agency theory). The research also test collateral and growth hypothesis. Leverage and dividend policy variables used in this study are already excluded outside shareholders interest. Results show that managerial ownership as self bonding and self monitoring in controlling agency conflict concern on the balancing model of agency cost. Agency theory variables (dividend and leverage) partially explain interdependency between leverage and dividend policies. Relationships between dividend influenced leverage significantly explained by contracting model of dividend but relationship between leverage influenced dividend fail explained by balancing model of agency cost. The results also support collateral and perquisites hypotheses. In general agency costs that occurred in Indonesia are agency costs of debt.

Keywords: Agency, debt, dividend, managerial, ownership, cost

JEL Classification: G32

Suggested Citation

Mahadwartha, Putu Anom, Empirical Test of Balancing Model of Agency Costs, Contracting Model of Agency Theory, Collateral, and Growth Hypothesis in Indonesian Capital Market (September 2002). Available at SSRN: https://ssrn.com/abstract=655001 or http://dx.doi.org/10.2139/ssrn.655001

Putu Anom Mahadwartha (Contact Author)

Faculty of Business and Economics, Universitas Surabaya ( email )

Raya Kalirungkut
Tenggilis
Surabaya, ID East Java 60293
Indonesia
+62312981139 (Phone)
+62312981239 (Fax)

HOME PAGE: http://fbe.ubaya.ac.id

Center for Asia Studies ( email )

Penjaringan Sari II blok i/19
Surabaya, East Java 60297
Indonesia
+62085648917574 (Phone)

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