Impact of Board Diversity on Agency Costs in the Context of Agency Theory Approach: Evidence From Listed Companies in Sri Lanka

Q3 Business, Management and Accounting

Indian Journal of Corporate Governance Pub Date : 2021-10-06 DOI:10.1177/09746862211045758

M. R. Rooly

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引用次数: 2

Abstract

Effective corporate governance leads the way towards aligning the interest between managers and shareholders. Effectiveness of practicing the corporate governance of companies in Sri Lanka is debatable topic due to the variation between standard and actual practices. This study aims to examine the influence of board diversity on agency costs of companies listed in Sri Lanka as proposed by agency theory. The sample of this research consists of all companies listed in Sri Lanka, exclusive of bank and financial institutions which are practicing unique governance practices issued by Central Bank of Sri Lanka. The final sample consists of 180 companies during the period from 2013 to 2019. This study deployed panel regression analysis to test the relationship formulated in the hypotheses by using the EViews 9 software. The results showed that the board diversity-related variables such as separate leadership structure and presence of non-executive director on companies’ board are appeared to have significant influence on agency costs. Meanwhile, board size does not have direct impact on agency costs. The findings of this study regarding board diversity and agency costs have important managerial implications, that these findings are unlikely to the prediction of agency theory and best practices. Agency theory is not applicable to these companies, since the exiting corporate governance practices increase agency costs. The potential benefits of this study led to re-think the board of directors of the companies, managers, shareholder and the policymakers to re-organise the implementation of best practices.

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代理理论视角下董事会多元化对代理成本的影响:来自斯里兰卡上市公司的证据

有效的公司治理引领着管理者和股东之间的利益协调。由于标准和实际实践之间的差异，斯里兰卡公司治理实践的有效性是一个有争议的话题。本研究旨在考察代理理论提出的董事会多元化对斯里兰卡上市公司代理成本的影响。本研究的样本包括在斯里兰卡上市的所有公司，不包括斯里兰卡中央银行发布的实施独特治理实践的银行和金融机构。最终样本包括2013年至2019年期间的180家公司。本研究采用面板回归分析，通过使用EViews 9软件来检验假设中的关系。结果表明，与董事会多样性相关的变量，如独立领导结构和非执行董事在公司董事会中的存在，似乎对代理成本有显著影响。同时，董事会规模对代理成本没有直接影响。这项关于董事会多样性和代理成本的研究结果具有重要的管理意义，这些发现不太可能预测代理理论和最佳实践。代理理论不适用于这些公司，因为现有的公司治理实践增加了代理成本。这项研究的潜在好处促使公司董事会、经理、股东和决策者重新思考如何组织实施最佳实践。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Indian Journal of Corporate Governance Business, Management and Accounting-Business and International Management

CiteScore

2.00

自引率

0.00%

发文量

期刊介绍： Indian Journal of Corporate Governance is a bi-annual refereed journal that provides a forum for discussions and exchanging views on a wide range of corporate governance issues ranging from board practices, independent directors, whistle blower policies and shareholder activism on one hand to media’s role in corporate governance, corporate social responsibility and sustainability reporting on the other. It comprises of research articles, concept papers, case studies and reports providing a blend of theory and practices of corporate governance globally to cater to the interests of practitioners, academics, researchers and policy makers.