The Impact of Corporate Governance Mechanism on Agency Cost: An Empirical Evidence of Pakistani Listed Companies
Tariq Aziz (aziztariq@live.com),
Sadia Majeed and
Saba Saleem
Additional contact information
Tariq Aziz: Department of Management Sciences, The Islamia University of Bahawalpur, Pakistan
Sadia Majeed: Department of Management Sciences, The Islamia University of Bahawalpur, Pakistan
Saba Saleem: Department of Management Sciences, The Islamia University of Bahawalpur, Pakistan
Business, Management and Economics Research, 2015, vol. 1, issue 6, 79-91
Abstract:
This study attempts to investigate the role of Corporate Governance in mitigating agency cost. For this purpose a sample of 100 firms selected on the basis of 100 INDEX of Karachi Stock Exchange during the period 2007 to 2011. To do so, alternative proxies for agency costs are employing: the ratio of total sales to total assets (asset turnover) and the ratio of selling, general & administrative expenses (SG&A) to total sales. Multivariate fixed effect regression is used to analyze the data. The explanatory variables include director ownership, institutional ownership, ownership Concentration, board size, CEO/Chair duality, Non Executive Directors, Debt Ratio, remuneration structure and board independence. The analysis is controlled for the influence of company size. The results show that higher director and institutional ownership reduces the level of agency cost. Smaller sized boards also results in lowering agency cost. Board independence has positive association with asset utilization ratio. The separation of the post of CEO and chairperson and higher remuneration lower agency cost. Bank debt constitutes one of the most important Corporate Governance devices for Pakistani Listed Companies. Also, managerial ownership, managerial compensation and ownership concentration seem to play an important role in mitigating agency costs.
Keywords: Corporate governance; Ownership structure; Agency cost; Karachi stock exchange. (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://www.arpgweb.com/pdf-files/bmer1(6)79-91.pdf (application/pdf)
http://www.arpgweb.com/?ic=journal&journal=8&month=10-2015&issue=6&volume=1 (text/html)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:arp:bmerar:2015:p:79-91
Access Statistics for this article
Business, Management and Economics Research is currently edited by Dr. Syed Zulfiqar Ali Shah
More articles in Business, Management and Economics Research from Academic Research Publishing Group Rahim Yar Khan 64200, Punjab, Pakistan.
Bibliographic data for series maintained by Managing Editor (info@arpgweb.com).