Revisiting agency theory: evidence of board independence and agency cost from Bangladesh

Rashid, Afzalur (2015) Revisiting agency theory: evidence of board independence and agency cost from Bangladesh. Journal of Business Ethics, 130 (1). pp. 181-198. ISSN 0167-4544

Abstract

This study examines the influence of board independence on firm agency cost among listed firms in Bangladesh, which feature concentrated ownership and high insider representation on corporate boards. This study uses three measures of agency cost: the 'expense ratio', the 'Q-free cash flow interaction' and the 'asset utilization ratio'. The finding of the study is that board independence can reduce the firm agency cost only under 'asset utilization ratio' measure of agency cost. These findings are robust to several robustness tests. Furthermore, the non-linearity tests suggest that the benefit of outside independent directors is generally plausible as a factor controlling agency costs in the case of a medium level of board independence. Overall, these findings do not reject the validity of agency theory, supporting the Anglo-American orthodoxy promoting outside independent directors as good monitors.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Permanent restricted access to Published version in accordance with the copyright policy of the publisher.
Faculty / Department / School: Current - Faculty of Business, Education, Law and Arts - School of Commerce
Date Deposited: 03 Jul 2014 23:31
Last Modified: 09 Sep 2016 04:34
Uncontrolled Keywords: agency theory; board independence; resource dependence theory; stewardship theory
Fields of Research : 22 Philosophy and Religious Studies > 2201 Applied Ethics > 220102 Business Ethics
15 Commerce, Management, Tourism and Services > 1503 Business and Management > 150303 Corporate Governance and Stakeholder Engagement
14 Economics > 1402 Applied Economics > 140209 Industry Economics and Industrial Organisation
Socio-Economic Objective: B Economic Development > 91 Economic Framework > 9102 Microeconomics > 910204 Industry Costs and Structure
Identification Number or DOI: 10.1007/s10551-014-2211-y
URI: http://eprints.usq.edu.au/id/eprint/25419

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