Ownership structure and agency costs: evidence from the insurance industry in Jordan
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Date
2023-12-11
Journal Title
Journal ISSN
Volume Title
Publisher
Universidad ESAN. ESAN Ediciones
Fecha de fin de embargo
Redes Sociales
Citación
Citación APAAbstract
Purpose: This study investigated the impact of corporate ownership structure on agency costs in the insurance industry. Design/methodology/approach: The study sample included 23 insurance companies listed on the Amman Stock Exchange (ASE) from 2010 to 2019. Panel regression was used to account for the firm- and time-specific unobservable variables and system-GMM estimation was used to address endogeneity concerns. Findings: The results show that managerial ownership positively (negatively) affects selling, general and administrative (SG&A) expenses (assets turnover), implying that unmonitored managers engage in activities that serve their own interests rather than those of shareholders. The largest shareholder's ownership has no impact on agency costs, implying that the ownership of the largest shareholder is irrelevant. However, as the wedge between the percentage of capital owned by the largest shareholders and managers increases, SG&A expenses (efficiency ratio) decrease (increases), indicating that the existence of large non-management shareholders reduces agency costs. After accounting for the endogeneity problem, the impact of ownership structure on agency costs measured by asset turnover remains robust. Originality/value: To the best of the authors' knowledge, this study is the first to provide unique evidence and useful insights into the determinants of agency costs from a frontier market in the Middle East and North Africa (MENA), with a focus on the insurance sector. Additionally, this study uses a new measure of separation between ownership and control by calculating the wedge between managers' and large shareholders' ownership.
Description
Keywords
Agency costs, Ownership structure, Managerial ownership, Large shareholders, Insurance industry, Costos de agencia, Estructura de propiedad, Propiedad gerencial, Grandes accionistas, Sector seguros
Citation
Tayeh, M., Mustafa, R., & Bino, A. (2023). Ownership structure and agency costs: evidence from the insurance industry in Jordan. Journal of Economics, Finance and Administrative Science, 28(56), 287–302. https://doi.org/10.1108/JEFAS-12-2021-0257
