IDEAS home Printed from https://ideas.repec.org/a/arp/bmerar/2015p79-91.html
   My bibliography  Save this article

The Impact of Corporate Governance Mechanism on Agency Cost: An Empirical Evidence of Pakistani Listed Companies

Author

Listed:
  • 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)

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.

Suggested Citation

  • Tariq Aziz & Sadia Majeed & Saba Saleem, 2015. "The Impact of Corporate Governance Mechanism on Agency Cost: An Empirical Evidence of Pakistani Listed Companies," Business, Management and Economics Research, Academic Research Publishing Group, vol. 1(6), pages 79-91, 10-2015.
    • Handle: RePEc:arp:bmerar:2015:p:79-91
    as

    Download full text from publisher

    File URL: http://www.arpgweb.com/pdf-files/bmer1(6)79-91.pdf
    Download Restriction: no
    File URL: http://www.arpgweb.com/?ic=journal&journal=8&month=10-2015&issue=6&volume=1
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marina Klaèmer Èalopa & Ivana Ðunðek Kokotec & Karolina Kokot, 2020. "Impact of board size and ownership concentration on agency costs: evidence for Croatian companies," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 38(2), pages 521-535.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arp:bmerar:2015:p:79-91. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Managing Editor (email available below). General contact details of provider: http://arpgweb.com/index.php?ic=journal&journal=8&info=aims .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.