The influence of corporate governance mechanisms of firm's agency costs

Abstract

The main goal of this study is to identify the mechanisms of corporate governance that can be used by companies to minimize agency costs. In order to achieve this goal a number of tasks have been fulfilled. First, the corporate governance mechanisms, such as the board of directors, the structure and concentration of ownership and debt financing have been identified. Secondly, the classification of agency costs and approaches to their measurement, as well as the justification of the relationship between corporate governance factors and agency costs has been presented. Then the research hypotheses about the direction of the relationship have been formulated and tested by econometric methods on the sample of Russian companies. The analysis of the results of this study allowed to formulate conclusions that the increase in the size of the board and the proportion of independent directors, the formation of an audit committee, as well as the increase in ownership of executive directors, institutional shareholders and ownership concentration lead to lower agency costs. The involvement of independent directors with diverse experience and availability of debt financing on the contrary lead to higher agency costs.