Examining the effect of agency cost on capital structure-financial performance nexus: empirical evidence for emerging market
Despite the long history of testing agency theory, it is yet standing undefeated. This study examines the relationship between capital structure and firm performance in an emerging economy, Iraq. Moreover, it seeks to find an answer for the question “does agency cost moderates the relationship betwe...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2022-12-01
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| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2022.2148364 |
| _version_ | 1797987155784499200 |
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| author | Shirwan Rafiq Sdiq Hariem A. Abdullah |
| author_facet | Shirwan Rafiq Sdiq Hariem A. Abdullah |
| author_sort | Shirwan Rafiq Sdiq |
| collection | DOAJ |
| description | Despite the long history of testing agency theory, it is yet standing undefeated. This study examines the relationship between capital structure and firm performance in an emerging economy, Iraq. Moreover, it seeks to find an answer for the question “does agency cost moderates the relationship between capital structure and financial performance?” in the case of a developing industrial sector. Data was collected from published financial statements from the Iraqi Stock Exchange. The study sample consists of several companies from industrial sector listed on ISX over the period 2004–2020. Firm performance is measured using both accounting data and market indicator. Agency cost is measured through operating expense ratio and asset utilization ratio. Testing for short-term and long-term parameters between groups, pooled mean group estimation method is used for data analysis. The results manifest evidence to support agency theory in explaining the relationship between capital structure and financial performance. Moreover, strong interactions are found indicating that agency cost has a considerable impact on the capital structure and firm performance association, that is, agency cost moderates the relationship between capital structure and firm performance. These results are robust checking various methods and diagnostics checks. These results are key evidence from an emerging country, Iraq to support the agency theory arguments. The results provide significant insights for managers of the sector particularly for the current rapid development in the sector. |
| first_indexed | 2024-04-11T07:44:08Z |
| format | Article |
| id | doaj.art-9f2397b80fcc49279c8dd3bb7ec6756e |
| institution | Directory Open Access Journal |
| issn | 2332-2039 |
| language | English |
| last_indexed | 2024-04-11T07:44:08Z |
| publishDate | 2022-12-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj.art-9f2397b80fcc49279c8dd3bb7ec6756e2022-12-22T04:36:23ZengTaylor & Francis GroupCogent Economics & Finance2332-20392022-12-0110110.1080/23322039.2022.2148364Examining the effect of agency cost on capital structure-financial performance nexus: empirical evidence for emerging marketShirwan Rafiq Sdiq0Hariem A. Abdullah1Accounting Department, College of Administration and Economics, University of Sulaimani, Kurdistan Regin, Sulaymaniyah, IraqAccounting Department, College of Administration and Economics, University of Sulaimani, Kurdistan Regin, Sulaymaniyah, IraqDespite the long history of testing agency theory, it is yet standing undefeated. This study examines the relationship between capital structure and firm performance in an emerging economy, Iraq. Moreover, it seeks to find an answer for the question “does agency cost moderates the relationship between capital structure and financial performance?” in the case of a developing industrial sector. Data was collected from published financial statements from the Iraqi Stock Exchange. The study sample consists of several companies from industrial sector listed on ISX over the period 2004–2020. Firm performance is measured using both accounting data and market indicator. Agency cost is measured through operating expense ratio and asset utilization ratio. Testing for short-term and long-term parameters between groups, pooled mean group estimation method is used for data analysis. The results manifest evidence to support agency theory in explaining the relationship between capital structure and financial performance. Moreover, strong interactions are found indicating that agency cost has a considerable impact on the capital structure and firm performance association, that is, agency cost moderates the relationship between capital structure and firm performance. These results are robust checking various methods and diagnostics checks. These results are key evidence from an emerging country, Iraq to support the agency theory arguments. The results provide significant insights for managers of the sector particularly for the current rapid development in the sector.https://www.tandfonline.com/doi/10.1080/23322039.2022.2148364Capital structureagency theoryfinancial performanceindustrial firmsemerging market |
| spellingShingle | Shirwan Rafiq Sdiq Hariem A. Abdullah Examining the effect of agency cost on capital structure-financial performance nexus: empirical evidence for emerging market Cogent Economics & Finance Capital structure agency theory financial performance industrial firms emerging market |
| title | Examining the effect of agency cost on capital structure-financial performance nexus: empirical evidence for emerging market |
| title_full | Examining the effect of agency cost on capital structure-financial performance nexus: empirical evidence for emerging market |
| title_fullStr | Examining the effect of agency cost on capital structure-financial performance nexus: empirical evidence for emerging market |
| title_full_unstemmed | Examining the effect of agency cost on capital structure-financial performance nexus: empirical evidence for emerging market |
| title_short | Examining the effect of agency cost on capital structure-financial performance nexus: empirical evidence for emerging market |
| title_sort | examining the effect of agency cost on capital structure financial performance nexus empirical evidence for emerging market |
| topic | Capital structure agency theory financial performance industrial firms emerging market |
| url | https://www.tandfonline.com/doi/10.1080/23322039.2022.2148364 |
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