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Examine the Relationship between Agency Costs of Free Cash Flow and Debt and Factors Affecting its: Simultaneous Equations Approach
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Vali Khodadadi   , Seyed Aziz Arman , Rahman Abobakri |
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Abstract: (3158 Views) |
Identifying the factors affecting agency costs and capital structure is of high significance due to their influence on the value of the company. Thus, the purpose of the current study is to target the interaction between the agency costs of free cash flow and debt levels of the company. Also, the effect of ownership structure on agency costs of free cash flow and features of the company on debt has been examined in the present study. In the current investigation, in addition to debt, management ownership variables, institutional ownership and ownership concentration are employed as the variables affecting agency costs of free cash flow. Hence, the data of 113 listed companies in Tehran stock Exchange in the period of 1383-1389 applying panel data within the framework of simultaneous equations using two-stage least squares were analysed. The results revealed that debt has a significant negative impact on agency costs of free cash flow. Also, the agency costs of free cash flow has led to more debt in the capital structure of the companies. Based on other results extracted in this research, institutional ownership and management ownership have a significant negative impact on the agency costs of free cash flow, but ownership concentration has increased agency costs. Also, there is a significant negative relationship between the profitability, firm size, risk and debts as well as a significant positive relationship between tangibility of assets and debt. |
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| Keywords: agency Costs of Free Cash Flow, Debt, ownership structure, simultaneous equations |
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Full-Text [PDF 1833 kb]
(83 Downloads)
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Type of Study: Research |
Subject:
General
Received: 2012/09/3 | Accepted: 2012/12/7 | Published: 2020/12/21
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