Monitoring and Managerial Discretion Effects on Agency Costs: Evidence from an Emerging Economy

• Autor(a) principal: Muñoz Mendoza,Jorge Andrés
• Data de Publicação: 2021
• Outros Autores: Yelpo,Sandra María Sepúlveda, Ramos,Carmen Lissette Veloso, Fuentealba,Carlos Leandro Delgado
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: BAR - Brazilian Administration Review
• Texto Completo: http://old.scielo.br/scielo.php?script=sci_arttext&pid=S1807-76922021000100302
• topic: agency costs; managerial discretion; monitoring; growth opportunities

ABSTRACT We analyzed the effect of managerial ownership, leverage, and managerial discretion on the agency costs of 14,719 Chilean companies. The results of the instrumental variables (IV) regressions indicate that managerial ownership and capital structure have a negative and non-linear effect on agency costs. Managerial ownership concentration is an effective means of internal control over agency costs, discarding the managerial entrenchment effect. The non-linear impact of debt suggests that for high leverage levels, agency costs would increase due to higher bankruptcy costs. Managerial discretion reduces agency costs; however, in firms with low growth opportunities, it increases them. These results have relevant implications for firms’ corporate policy and investors.