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Agency Costs and Ownership Structure in Australia

Posted: 26 Oct 2005  

Grant Fleming

Continuity Capital Partners

Richard A. Heaney

University of Western Australia

Rochelle McCosker

Independent Author


Financial economics often assumes that equity agency costs increase with the separation of ownership and control. This paper tests this relationship using a survey sample of approximately 3800 Australian small and medium enterprises for 1996-7 and 1997-8. Following Ang, Cole and Lin (2000) we estimate a zero equity agency cost benchmark (in terms of operating expenses and asset utilization ratios) for the 100% owner-manager firm. We then examine how agency costs change when ownership and control are separated. We report a positive relationship between equity agency costs and the separation of ownership and control.

Keywords: Equity agency costs, small to medium enterprises (SMEs), owner-managers, separation of control and ownership

JEL Classification: G32

Suggested Citation

Fleming, Grant and Heaney, Richard A. and McCosker, Rochelle, Agency Costs and Ownership Structure in Australia. Pacific-Basin Finance Journal, Vol. 13, No. 1, pp. 29-52, January 2005. Available at SSRN:

Grant Alan Fleming

Continuity Capital Partners ( email )

GPO Box 314
Canberra, Australian Capital Territory 2601

Richard A. Heaney (Contact Author)

University of Western Australia ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
08 6488 2902 (Phone)
08 6488 1047 (Fax)

Rochelle McCosker

Independent Author ( email )

No Address Available

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