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Agency Costs and the Firm's Optimum Capital Structure Under Separation between Ownership and Management

100%
Rychlowska-Musial E.
Ekonomista
|
2008
|
issue 4
499-520
EN
The article analyses relations that take place between the owner (inclusive of shareholders) of the firm and its management. This problem is known and well described in the literature of the subject, but attempts to measure the agency costs in real firms are quite rare and most frequently are conducted indirectly. We propose a new method of assessing agency costs, indicating that they depend on three main determinants: attitude of decision makers towards debt financing, dividend disbursement policy and the length of time horizon taken into account. Theoretical appraisals are supplemented by simulations that are based on the empirical data. The results show that there are two factors that have the decisive influence on the reduction of agency costs, namely the long term managerial contracts and the high financial leverage.
2

CONSEQUENCES OF CORPORATE DEBT FINANCING IN PRICE AGREEMENTS' STABILITY

100%
Macas P., Serrasqueiro Z., Saraiva P.
Ekonomický časopis (Journal of Economics)
|
2005
|
vol. 53
|
issue 10
1038-1050
EN
The present article aims to show that price agreements are more unstable if their companies use debt as a financing instrument. Moreover, the higher the number of companies (that use debt) in a price agreement, the more instable the price agreement will be. Even when companies compete a la Bertrand and if debt financing is high, the duopoly of price agreement will be instable. When debt financing is present, we found there is a higher number of sub-game perfect equilibrium, in a posteriorly a la Cournot competition, then when debt financing is not present and that this (possible) existence of sub-game perfect equilibrium increases as the debt level of financing increases.
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