Agency costs, capital structure and corporate performance

Purpose: The aim of this study is, firstto describe and explore equity agency costs; second, to explore the impact ofcapital structure on equity agency costs; and finally, to examine the impact ofagency costs on the performance of listed companies. Methodology: Panel data regression hasbeen used for research data analysis. Results: The results of the work showthat equity to capital and long-term debt to capital variables have a positiveand significant impact on the agency costs of listed companies in the Republicof Croatia. The study indicates that long-term debt to capital variable has anegative and significant impact on the agency costs of listed companies inSlovenia and the Czech Republic. Furthermore, we find evidence to suggest thatchanges in agency costs have little or no effect on the performance of listedcompanies in Croatia, Slovenia and the Czech Republic. The findings suggest thatthe capital structure decisions affect the agency costs of listed companies andthe agency costs may affect corporate performance. Conclusion: This study makes a number ofcontributions to the agency costs literature. It presents the first study ofagency costs of listed companies in Croatia, Slovenia and the Czech Republicthat uses panel data, a technique that enables us to isolate both cross sectionand time series effects. The present paper can help managers to betterunderstand equity agency costs and their effects on corporate performance.