Posted: 26 Oct 2005
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: 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: https://ssrn.com/abstract=825224