Agency costs in US banks - have the factors changed post crisis?

Mahendra Raj, Rajesh Kumar and Sujit Sukumaran

International Journal of Corporate Governance, 2018, vol. 9, issue 2, 175-200

Abstract: This study analyses the effectiveness of the series of post-2008 regulatory reforms in the banking industry. The paper aims to identify and classify new measures of agency costs. The results suggest that agency costs have increased in the post economic recession period. Agency costs have increased for all banks irrespective of sizes. A new theoretical framework on behavioural lines is proposed for the manifestation of agency costs. The study suggests that four types of behavioural factors result in agency costs - self-enrichment, complacency, cover-up and risk affinity. Agency costs originate due to the self-enrichment behavioural nature of managers. The study provides insights to the fact that management behaviour may adapt to both the external and internal environment to facilitate agency costs. The study suggests that the new regulatory measures may not have worked well on expected lines or may have provided adverse incentives which would have increased agency costs.

Keywords: agency costs; self-enrichment; complacency; cover-up; risk affinity. (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijcgov:v:9:y:2018:i:2:p:175-200

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