The Time Effects And Endogenous Research On The Principal-agent Cost Of Listed Companies In China

The principal-agent cost is a hot issue of listed corporation governance research. It originates from theseparation of enterprise ownership and management rights. With the change of market environment and enterprisescale becomes large, because of the time, energy and other aspects of limitations, the owner of the enterprise cannot be independent of enterprise management, the owner of the enterprise will entrust enterprise management to themanager who is experienced and professional knowledge. With the emergence and development of theprincipal-agent problem, the manager masters most of information of the enterprise, the manager will rely oninformation superiority to pursue his own interests, waste of enterprise resources. The principal-agent cost is toprevent the manager from damaging the interests of the enterprise. Therefore, the time effects and endogenousresearch of the principal-agent cost of listed companies in China is the focus of many scholars to discuss.In this paper, annual data of listed company in China’s securities market during2003-2012is used to makeempirical analysis of the general rule about agency costs changing over time, and try to make a guess on the timeeffects of the principal-agent cost from the perspective of reasonable. In the process of empirical research, firstly,the heterogeneity of the stochastic frontier model to measure the principal-agent cost; Sencondly, fixed-effectpanel model is applied to do pooled regress containing three items, two items and one item, to verify whether theprincipal-agent cost of listed companies is a general rule under the conditions of change over time in the externalenvironment that is relatively stable; Lastly, add some exogenous variables that influence on the principal-agentcost, for examples, ownership concentration, equity balance degree, free cash flow. Empirical evidence shows thatthe regularity of changes with time of the principal-agent cost is significant, the models have good robustness. Theempirical results show that the principal-agent cost of listed companies in China`s stock market with the extensionof time to market, generally shows characteristic of "inverted U-shaped" curve, the curve first increased and thendecreased. Finally, from two angles of limited rational hypothesis and the hypothesis of free cash flow for theendogenous causes of the principal-agent cost, provide a reasonable explanation.