The Relationship between Agency Costs and Expropriation of Minority Shareholders’ Interests with Emphasis on the Role of Financial Reporting Quality

Document Type : Research Paper

Authors

1 Associate professor, Department of Accounting, Islamic Azad University, Tabriz, Iran

2 Department of Accounting, Marand Branch, Islamic Azad University, Marand, Iran

Abstract

Agency theory states that agency cost is resulted from conflict of interests between managers and shareholders that there may be consequences such as Expropriation of Minority Shareholders’ Interests interest. This study examines the relationship between agency costs and expropriation of minority shareholders’ interests with emphasis on the role of financial reporting quality among listed companies in Tehran Stock Exchange. This study in terms of target is applied and the method is Ex post facto research. The sample used in our research includes 102 firms listed on the Tehran stock exchange during the period 2011-2016. In this study, to measure the agency costs and Expropriation of Minority Shareholder interests, it was used the interaction between of the Q-Tobin index and free cash flows and the summation of a Herfindal index for ownership concentration and the related party transactions respectively. Also, Francis et al (2005) model is used to measure financial reporting quality. In this study to test the hypothesis, multivariate regression model was used. The results of this study show that there is a positive and significant relationship between agency costs and expropriation of minority shareholders. Also, the results show that, financial reporting quality have a negative and significant impact on the relationship between agency costs and expropriation of minority shareholders’ interests.

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Main Subjects

References

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Journal of Accounting and Social Interests
Volume 9, Issue 2 - Serial Number 33
September 2019
Pages 1-24

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History

  • Receive Date: 24 April 2018
  • Revise Date: 25 July 2019
  • Accept Date: 06 August 2018

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