TITLE:
Agency Costs and the Power of “Apply and Explain” from South Africa
AUTHORS:
Nkwantabisa Agyeiwaa Owusu, Hadjor Falistus Raphael, Tchuiendem Nelly Joel
KEYWORDS:
Agency Costs, Board Characteristics, Institutional Investors, Apply and Explain
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.10 No.4,
December
23,
2021
ABSTRACT: This paper examines whether corporate governance
mechanisms and the presence of institutional investors in South African
publicly listed firms impact agency costs. Our findings show that large board size has harmful effects on agency costs; board independence allays agency costs. It is vital to distinguish
institutional investors by investment objective and their monitoring ability to
reduce agency costs. Results show that while institutional investors have taken
as a homogenous group appeared to play an important
governance role in allaying agency problems, pressure-insensitive investors can
exert more influence in agency-related issues. Results have policy implications
on the monitoring abilities of Independent Non-Executive Directors and
institutional investors in South Africa.