Agency costs, asset specificity, and the capital structure of the firm

Vilasuso, Jon; Minkler, Alanson P.

doi:10.1016/s0167-2681(00)00151-7

Cited by 44 publications

(18 citation statements)

References 23 publications

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“…Firm size is often taken as a measure of diversification and risk, while asset structure is a typical proxy for the cost if default occurs. Alderson and Betker (1995), Titman and Wessels (1988), and Vilasuso and Minkler (2001), among others, provide empirical evidence in support of the idea that firms which hold tangible assets can support more debt. Likewise in the context of Thailand, Wiwattanakantang (1999) finds support for the prediction that large firms are less prone to bankruptcy due to being more diversified.…”

Section: Capital Structure and Business Groups: Theoretical Consideramentioning

confidence: 79%

Leverage and business groups: Evidence from Indian firms

Manos

Murinde

Green

2007

Journal of Economics and Business

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Section: Capital Structure and Business Groups: Theoretical Consideramentioning

confidence: 79%

Leverage and business groups: Evidence from Indian firms

Manos

Murinde

Green

2007

Journal of Economics and Business

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“…Large firms have scale economies and better access to bank credits (see, for example, Chhibber and Majumdar, 1999) and size also affects governance. The asset structure or the asset tangibility influences corporate growth and valuation (see, for example, Vilasuso and Minkler, 2001), as well as managerial agency costs. For example, mortgage borrowing depends on the tangibility of assets.…”

Section: Impact Of Debt Financing On Managerial Qualitymentioning

confidence: 99%

Debt financing, soft budget constraints, and government ownership Evidence from China¹

Tian

Estrin

2007

Economics of Transition

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Debt financing is expected to improve the quality of corporate governance, but we find, using a large sample of public listed companies (PLCs) from China, that an increase in bank loans increases the size of managerial perks and free cash flows and decreases corporate efficiency. We find that bank lending facilitates managerial exploitation of corporate wealth in government-controlled firms, but constrains managerial agency costs in firms controlled by private owners. We argue that the failure of corporate governance may derive from the shared government ownership of lenders and borrowers, which nurtures soft budget constraints.JEL classifications: G32, G34, P34.

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“…Results indicate that the debt has a positive effect on free cash flow firms with low growth opportunities in terms of the bottom quartile of IOS. Vilasuso and Minkler (2001) develop a dynamic model that incorporates the issues of agency cost and asset specificity. Results based on an unbalanced panel of 28 publicly-held firms show that these two factors are significant determinants of the optimal capital structure of firms.…”

Section: Debt Policy and Agency Costs Of Free Cash Flowmentioning

confidence: 99%

A survey on the relationship between ownership structure, debt policy and dividend policy in Tunisian stock exchange : Three stage least square simultaneous model approach

Moussa

Chichti

2013

International Journal of Accounting and Economics Studies

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This research tests the efficiency of the debt policy, dividend policy and ownership structure as mechanism of resolution of agency conflicts between shareholders and managers due to the problem of overinvestment, in the limitation of the problem of the free cash flow. By estimating three stage least square simultaneous model and on the basis of a sample of 35 non-financial Tunisian listed companies selected for the period 2000-2009, our results are in favor of the theory of free cash flows of Jensen (1986) that stipulates that the debt policy represents the principal governance mechanism that can limit the risk of free cash flow. However, our empirical results do not confirm our hypothesis implies that the solution to reduce the level of free cash flow in the Tunisian firms with low growth opportunities is the use of policy dividends. It therefore appears that in the case of our sample, managers must settle their debts to creditors. They should thus allocate free cash flow to profitable projects. Thus, the debt reduces agency costs of free cash flow and present as a control mechanism which substitute dividend policy. Also, it is found that managerial ownership lowers the level of agency costs of free cash flow. However, the ownership concentration increases the risk of the free cash flow. Finally, regarding the impact of ownership structure on the payout ratio, our results support the idea that more risk aversion of the majority shareholders and their intention to expropriate minority shareholders through the extraction private benefits are the cause of a low dividend.

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Agency costs, asset specificity, and the capital structure of the firm

Cited by 44 publications

References 23 publications

Leverage and business groups: Evidence from Indian firms

Leverage and business groups: Evidence from Indian firms

Debt financing, soft budget constraints, and government ownership Evidence from China¹

A survey on the relationship between ownership structure, debt policy and dividend policy in Tunisian stock exchange : Three stage least square simultaneous model approach

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Agency costs, asset specificity, and the capital structure of the firm

Cited by 44 publications

References 23 publications

Leverage and business groups: Evidence from Indian firms

Leverage and business groups: Evidence from Indian firms

Debt financing, soft budget constraints, and government ownership Evidence from China1

A survey on the relationship between ownership structure, debt policy and dividend policy in Tunisian stock exchange : Three stage least square simultaneous model approach

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Product

Resources

About

Debt financing, soft budget constraints, and government ownership Evidence from China¹