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Capital Structure and Agency Costs

Author

Listed:
  • ADOGBEJI Gborogen

    (Department of Accounting, Faculty of Management, University of Benin)

  • Ohidoa Toluwa

    (Department of Accounting, Faculty of Management Sciences, University of Benin)

Abstract

Capital structure and agency cost. Objectives: The study empirically investigates the relationship between capital structure and agency cost of non-financial firms. Prior Work: This extended and build on the studies of Hajis said (2020) and Omuemu and Olowe (2020); Kumar (2017); Awan and Amin (2014); Jaelani (2017) and Zakaria (2016) that also research in the same direction of our study. Approach: this study adopted a longitudinal research design and the Ordinary Least Square method of data analysis. Results: The study showed that total debt to equity ratio and long term debt to asset ratio have a negative and significant relationship with agency cost, whereas short-term debt to asset ratio, long term debt to equity ratio, and equity to assets ratio have a positive and significant relationship with agency cost. Implication: the study has ushered prospective and existing investors and organizations, the knowledge of the relevance of short and long term debts to agency cost Nigeria. Value: the demonstrated that the ratio of short-term debt to assets has a positive and significant effect on agency.

Suggested Citation

  • ADOGBEJI Gborogen & Ohidoa Toluwa, 2023. "Capital Structure and Agency Costs," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(4), pages 431-438, April.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:4:p:431-438
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    References listed on IDEAS

    as
    1. Neeraj K. Sehrawat & Amit Kumar & Nandita Lohia & Satvik Bansal & Tanya Agarwal, 2019. "Impact of Corporate Governance on Earnings Management: Large Sample Evidence from India," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(12), pages 1335-1345, December.
    2. Satish Kumar & Sisira Colombage & Purnima Rao, 2017. "Research on capital structure determinants: a review and future directions," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 13(2), pages 106-132, April.
    3. Graham C. Hall & Patrick J. Hutchinson & Nicos Michaelas, 2004. "Determinants of the Capital Structures of European SMEs," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(5‐6), pages 711-728, June.
    4. Sanford J. Grossman & Oliver D. Hart, 1982. "Corporate Financial Structure and Managerial Incentives," NBER Chapters, in: The Economics of Information and Uncertainty, pages 107-140, National Bureau of Economic Research, Inc.
    5. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    6. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
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    8. Neeraj K Sehrawat & Amit Kumar & Nandita Lohia & Satvik Bansal & Tanya Agarwal, 2019. "Impact of Corporate Governance on Earnings Management: Large Sample Evidence from India," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(12), pages 1335-1345.
    9. Satish Kumar & Sisira Colombage & Purnima Rao, 2017. "Research on capital structure determinants: a review and future directions," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 13(2), pages 106-132, April.
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