Abstract

SALEHI, Mahdi; SADATIFAR, Zakiyeh  and  ADIBIAN, Mohammad Sadegh. The impact of the characteristics and behaviors of the board of directors on agency costs in Iran. Contad. Adm [online]. 2021, vol.66, n.1, 00005.  Epub Oct 11, 2021. ISSN 0186-1042.  https://doi.org/10.22201/fca.24488410e.2021.2384.

The present study aims to identify the contributing factors to agency costs in Iran applying panel data technique for financial data of 112 listed companies on the Tehran Stock Exchange from 2011 through 2017. Three models of measurement namely (1) inverse asset turnover ratio; (2) operational cost to sales ratio; and (3) the index obtained from the factor analysis of inverse variables of asset ratio and operational cost to sales ratio are used. The obtained results indicate that the greater number of board directors’ meeting may improve the level of agency costs (based on two cost models), and it also may increase the level of agency costs (based on one model). Second, the results of the paper show that the higher educational level of boards’ members may also decrease the agency cost. Moreover, we evidence that the presence of women in the board of directors, and the ownership of firms’ share by the members of the board of directors may increase the level of agency cost for firms. Since only one (out of three) model suggests these associations, our findings are less severe in these regards. Further analyses document that appointing one of the board director’s members as chief executive officer (CEO duality) plies no effective role in mitigating the agency cost. The similar findings, based on our three cost models, suggest a robust conclusion in this context.

Keywords : Agency costs; Factor analysis; Board expertise; The presence of women on the board; CEO duality; compensation; G10; M42; M41.