Small Family Businesses: Innovation, Risk and Value

This article reviews the literature and applies principal-to-principal (PP) conflict theory to small family based businesses. The lack of accurate measurement and communication of risk leading to issues with innovation, is the primary cause of PP agency costs. Careful analysis of the risk levels reflected in the cost of debt and opportunity cost of equity provides a theoretically robust and empirically estimable process for ascertaining the true PP agency cost. Awareness of the constraining governance structures and the suggested method, based on the cost of capital, to assess small business risk can assist SME owners and financiers to SMEs to promote business efficiency and innovation.

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Agency cost of debt: evidence from Kansas farm operations

Agricultural Finance Review ◽

10.1108/afr-03-2016-0023 ◽

2017 ◽

Vol 77 (1) ◽

pp. 111-124 ◽

Cited By ~ 6

Author(s):

Brady Brewer ◽

Allen M. Featherstone

Keyword(s):

Agency Costs ◽

Cost Minimization ◽

Returns To Scale ◽

Minimum Cost ◽

Agency Cost ◽

Cost Of Debt ◽

Variable Cost ◽

Content Type ◽

Cost Frontier ◽

The Cost

Purpose The purpose of this paper is to examine how debt affects the cost structure of a farm. Agency costs arise when stakeholders of a farm manage their farm differently to obtain debt which results in inefficiencies. These inefficiencies cause a farm to deviate from cost minimization strategies. Design/methodology/approach This study uses the non-parametric technique of data envelopment analysis. Through this method, a non-stochastic cost frontier is constructed where all farms must lie on or above the frontier. This allows for the analysis of how debt affects the shape of the cost frontier and for how debt affects deviations away from cost-minimizing strategy. The shadow costs of the debt constraints in the linear programming problem are used to analyze the effect of debt at the cost frontier while a series of Tobit models are estimated to examine the effect of debt on deviations away from the frontier. Findings The findings of this paper support the existence of agency costs associated with debt for Kansas farms. The addition of debt and capital constraints lowered the minimum cost frontier increasing the average efficient cost under variable returns to scale. However, for those farms on the frontier, the shadow cost of debt was negative meaning an increase in debt would lower the overall variable cost. The increase of debt was found to be negatively correlated to the efficiency score of the farms. Originality/value This paper provides value by supporting the existence of agency costs which has been disagreed upon in the literature and also providing new insights for how to analyze agency costs. Since debt was found to have a negative shadow value for those farms on the frontier but negatively correlated with efficiency scores, this suggests that agency costs affect firms differently depending on where the farm is on the cost frontier.

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Does a high dividend payout ratio signal proper corporate governance or high agency cost of debt?

Corporate Ownership and Control ◽

10.22495/cocv14i2art5 ◽

2017 ◽

Vol 14 (2) ◽

pp. 51-58 ◽

Cited By ~ 3

Author(s):

Imad Jabbouri ◽

Abdelillah El Attar

Keyword(s):

Agency Costs ◽

Negative Relationship ◽

Agency Cost ◽

Cost Of Debt ◽

Information Asymmetries ◽

Dividend Payout ◽

Dividend Payments ◽

Agency Cost Of Debt ◽

The Cost ◽

The Relationship

This paper examines the relationship between dividend policy and the cost of debt in Morocco. The results show that high dividend payments reflect a low level of agency costs of equity and low information asymmetries. Consequently, creditors demand lower return for providing their capital to high dividend-paying firms. The findings reveal that creditors are less concerned with agency costs of debt. The study shows that the negative relationship between dividend payout ratios and cost of debt is more pronounced in firms with higher information asymmetries.

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AGENCY COST OF CREDIT ON MICROFINANCE INSTITUTIONS OF COOPERATIVE AND RURAL BANK TYPE

International Journal of Economics Business and Accounting Research (IJEBAR) ◽

10.29040/ijebar.v4i03.1252 ◽

2020 ◽

Vol 4 (03) ◽

Author(s):

Purwanto Purwanto

Keyword(s):

Customer Service ◽

Information Exchange ◽

Social Performance ◽

Multiple Logistic Regression Analysis ◽

Secondary Data ◽

Agency Cost ◽

Cost Of Debt ◽

Microfinance Institutions ◽

Capital Costs ◽

The Cost

Historically, most microfinance providers are in the form of cooperatives, while some policies studies recommend shareholders ownership because it can reduce the risk of capital costs and charges opportunism manager. This study aims to analyze the factors in the cost of ownership that distinguishes MFI with the type of cooperative ownership and village banks. The study was conducted by using secondary data from the MIX (Microfinance Information Exchange) market year 2007-2013. The factors Influencing the determinants of MFI ownership costs were Analyzed using multiple logistic regression analysis technique. The study found that the MFI of cooperative has advantages in operational efficiency and credit risk while village banks have advantages in the cost of customer service, cost of debt, cost of capital, social performance and financial performance.

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