Assessment of factors affecting agency cost in M&A context: a systematic literature review

M&As are significant corporate events that lead to changes in ownership structure and management. These events result in a “change” in conflict of interest (agency cost) among owners. In the context of M&A, agency cost could be affected by many factors. The aim of this research is to review the existing literature on factors affecting agency costs in the context of M&A. The impact of agency cost is elucidated in M&A context by examining its impact on M&A performance. A conceptual framework is developed based on review and synthesis of evidence from 38 research papers. Three factors were identified that affect agency costs in the M&A context and they are firms’ financials, corporate structure, and deal characteristics. Additionally, agency cost is classified according to nature of conflict among stakeholders such as shareholder-manager conflict (AC-1), shareholder-director conflict (AC-1.1), shareholder-shareholder conflict (AC-2) and shareholder-creditor conflict (AC-3). This classification of agency cost furthers our understanding of the impact of different factors. The synthesis of evidence identifies research gaps that can extend future research avenues and improve comprehension of the effects of agency costs in M&A context. This study’s findings have significance for analysts focusing on post-M&A returns and policymakers seeking to devise and implement policies reducing post-M&A agency costs. This systematic review contributes to the current reservoir of knowledge in the field of M&A research by identifying the factors influencing agency costs and their influence on post-M&A performance. The provided insights may facilitate the development of strategies for managing agency costs in M&A transactions.