Agency Costs of Supply Chain Companies in Asia
Abstract
The objective of this study is to investigate various aspects, including endogenous and exogenous corporate factors, affecting the agency costs of supply chain companies in Asia. This study uses two methods: ordinary least squares and panel data fixed effects (FEM and REM). The data were collected by hand from many sources for 2015-2020. After controlling for unobserved sample-specific fixed effects, this paper proves that board size, salary, institutional ownership, audit committee, and independent commissioner have no statistical significance. Meanwhile, the remaining three variables, leverage, state ownership, and C/A, have a significant impact on agency costs. Firms with high levels of debt will be controlled by the debtor, and thus, managers are less likely to commit self-seeking; the government has an incentive to control the company tightly and effectively, and when the firm has more money, it has to incur more agency costs. The results indicate that the adoption of individual corporate governance attributes has no impact on firm-level agency costs within a private and voluntary contracting setting. However, a higher level of compliance with an overall governance index variable, which represents the current requirements, is associated with significantly lower agency costs. Furthermore, the positive influence of voluntary governance compliance on agency costs remains consistent regardless of the firm's ownership structure. Our research results contribute to providing a broader understanding of agency costs within a specific field, such as the supply chain. The findings of this study can be valuable for managers in mitigating conflicts between CEOs and shareholders. Additionally, investors will have additional tools to identify potential businesses for investment, enabling them to avoid companies with excessively high agency costs.
Keywords: agency cost, supply chain companies, ownership.
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