This article intends to review the theoretical aspects and empirical evidences made on agency theory It is aimed to explore the main ideas, perspectives, problems and issues related to the agency theory through a literature survey It discusses the theoretical aspects of agency theory and the various concepts and issues related to it and documents empirical evidences on the mechanisms that diminish the agency cost The conflict of interest and agency cost arises due to the separation of ownership from control, different risk preferences, information asymmetry and moral hazards The literatures have cited many solutions like strong ownership control, managerial ownership, independent board members and different committees can be useful in controlling the agency conflict and its cost This literature survey will enlighten the practitioners and researchers in understanding, analysing the agency problem and will be helpful in mitigating the agency problem

Agency theory: Review of Theory and Evidence on Problems and Perspectives:

This paper aims to examine whether and how gender diversity and CEO gender can influence firm value in the emerging market of Pakistan. The study further tests whether these relations vary across state-owned enterprises (SOE) and non-state-owned enterprises (NSOE).,This study considers Pakistani listed firms over the period 2010-2017. The firms have been divided into SOE and NSOE for additional analysis. Tobin’s Q is used to measure firm’s value.,The authors document that female directors (FDirectors) on corporate boards is positively associated with firm value. The findings also illustrate that female CEOs (FCEOs) enhances a firm value. Additional analyses show that the influence of FDirectors and FCEOs on firm value is stronger in NSOE than in SOE.,The results suggest that gender diversity and CEO gender play a significant role in corporate decisions. The findings imply that FDirectors discipline the management, reduce agency conflicts and thereby improve corporate governance, resulting in higher firm value.,This study has two important contributions. First, while prior studies mostly based their arguments on using gender diversity of corporate boards, this study shows that a firm performance can be significantly improved if a female serves as a CEO. Second, this study also tests the stated relations for SOE and NSOE and show that gender diversity plays a significant role in NSOE than in SOE.

Do gender diversity and CEO gender enhance firm’s value? Evidence from an emerging economy

The main objective of this study is to examine the performance of companies listed in the Saudi Stock Exchange. For this purpose, we studied and tested a sample of 792 firm-years among from 11 industrial groups for the years 2006 to 2013 and compared Family and Non-family firms. The research addresses the questions 1) Do family owned firms perform better? 2) How does concentration of ownership affect firm performance, comparing family firms to non-family ones? This research attempts to fill a research gap on the relationship or determinants of capital structure in one of the emerging markets, Saudi Arabia. This study will be implemented through a quantitative approach. Secondary data were obtained from published annual statistical data, from the company financial reports and the DataStream database.

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Family Ownership, Corporate Governance and Performance: Evidence from Saudi Arabia

This study examines how governance mechanisms affect the quality of integrated reporting (IR), which is fast emerging both as a tool to help firms understand their value creation process and to communicate effectively with external stakeholders. This study first developed an index to assess the quality of integrated reports. Subsequently, 132 integrated reports of Sri Lankan public listed companies selected over a three-year period were content analysed. The hypotheses formulated on the relationship between corporate governance and the quality of IR based on the agency theory were analysed using multivariate linear regression and panel regression. The results show that there is limited support from the corporate governance system for providing quality information to stakeholders on the value creation process through IR, except for board size and the availability of a separate risk management committee. This is the result of the heavy emphasis of corporate governance requirements and the resulting mechanisms of Sri Lankan companies on mandatory corporate reporting requirements compared to a voluntary reporting model such as IR. Since many corporate governance aspects are meant to fulfill mandatory reporting requirements, the results imply that the directors have given limited attention to providing quality information through voluntary disclosure practices such as IR, although they use resources to prepare integrated reports.

https://www.mdpi.com/2071-1050/12/10/4262/pdf

Does Corporate Governance Affect the Quality of Integrated Reporting

The purpose of this paper is to investigate the impact of external and internal corporate governance mechanisms on agency costs.,The author uses data from German firms that were listed in the regulated market of the Frankfurt Stock exchange during 2006-2011. Agency costs were measured using stochastic frontier analysis, a relatively new approach to estimate agency costs. The regression analysis is applied to test the model.,The results indicate that an industry specialized audit firm, the presence of a large audit firm, abnormal audit fees, management ownership and variable management compensation are significantly negatively associated with the level of a firms’ agency costs. In contrast, this seems not to be true for the existence of an audit committee for which the results of the paper document a non-significant association.,The paper contributes to the existing literature in several ways. First, the research design is to the best of the authors’ knowledge the first that investigates the influence of different corporate governance mechanisms on the level of agency costs. Second, previous studies are mainly focused on the US audit market. This focus on the US audit market leaves uncertainties regarding the direction and magnitude of the empirical relationship in the European and German environmental context. Finally, the paper provides initial empirical evidence for a sample of German IFRS listed companies (IFRS – International Financial Reporting Standards).

The impact of external and internal corporate governance mechanisms on agency costs

The article attempts to investigate the role of ownership structure and corporate governance in mitigating agency cost in a sample of 50 firms selected on the basis of market capitalization from “Karachi Stock Exchange” during the period 2003 to 2006. We used the proxy asset utilisation ratio to measure agency cost. Multivariate fixed effect regression is used to analyze the data. The explanatory variables include director ownership, institutional ownership, external ownership, board size, CEO/Chair duality, remuneration structure and board independence. 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 utilisation ratio. The separation of the post of CEO and chairperson and higher remuneration lower agency cost.

https://mpra.ub.uni-muenchen.de/42418/1/MPRA_paper_42418.pdf

Gul Sajid

Papers

Agency Cost, Corporate Governance and Ownership Structure (The Case of Pakistan)