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Do shareholder coalitions affect agency costs? Evidence from Italian-listed companies

Fabrizio Rossi, James R. Barth and Richard Cebula ()

Research in International Business and Finance, 2018, vol. 46, issue C, 181-200

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 1956 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 (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2018
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