Full Article: PDF
Scientific Object Identifier: http://s-o-i.org/1.1/TAS-01-33-4
DOI: http://dx.doi.org/10.15863/TAS.2016.01.33.4
Language: English
Citation: Torabi R, Ganji F (2016) A SURVEY OF THE RELATIONSHIP BETWEEN AGENCY COSTS AND FINANCIAL RATIOS IN COMPANIES LISTED ON TSE DURING 2008-2012. ISJ Theoretical & Applied Science, 01 (33): 18-21. Soi: http://s-o-i.org/1.1/TAS-01-33-4 Doi: http://dx.doi.org/10.15863/TAS.2016.01.33.4 |
Pages: 18-21
Published: 30.01.2016
Abstract: Economic growth, increased number of closely held companies and separation of management from ownership have challenged agency issues as one of the most important concenters of investors. Agency issues are based on the reality that investors have no required capability to manage the company affairs. Thus, this responsibility is delegated to managers. If managers and investors maximize their personal benefits and controlling the performance of agent requires costs. This shows that the agent attempts not to fulfill the benefits of owner and maximize his wealth. Additionally, selection of a good criterion to be sure of achieving final goal as maximizing the wealth of owners is one of the most important solutions of shareholders to evaluate the company performance and correct economic decisions. The present study evaluates the relationship between agency cost and financial ratios in companies listed on TSE. The agency relationship is a type of contract by which the owner delegates an agent to perform operation and delegate's power to take decision. By formation of agency relationship, agency costs of benefits conflict are created between parties. To measure financial ratios via profitability ratios, six criteria of ROA-ROS-ROE-NPM-ROC-GPM are applied. To do this, the information of companies listed on TSE during 2008-2012 is used. The general results of study show that there is a significant association between agency costs, financial ratios, return on asset, return on sale, net profit margin, return on capital and gross profit margin and all hypotheses are supported.
Key words: Agency theory, Financial ratios, Agency costs, Benefits conflict, Profitability ratios, Stock exchange market.
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