Research On Time-varying Characteristics Of The Agent Cost Of Listed Companies

As an efficient organization,the company is very important to the development of modern economy.The separation of ownership and control is a common feature of current companies,the agent cost problem caused by this is very worthy of attention.Doing in-depth research and discussion on agent cost is very helpful to grasp the value and trend of the company for managers,investors and regulators,very useful for company operations,and then very significative for the stable development of a country's economy.The present research on agent cost mainly focused on the definition,causes and responses,while the time-varying characteristics of the agent cost are less concerned.It is well known that the cycle theory originated from the development of life early,but with the deepening of the exploration and cognition of economic laws,it is applied to the description of economic phenomena gradually,and it is widely used in all aspects of economic research,cycle phenomenon is no longer confined to the specific phenomenon of a particular subject,it gradually becomes the scientific logic of people's cognition of everything,it affords us important support to explore the nature of things.Then,does the agent cost of listed companies have some periodic characteristics? This paper researches weather the agent cost presents a general law over time for a period after the company listing by empirical analysis,and attempts to make a theoretical conjecture,explaining the financial logic why the agent cost of listed companies has time-varying characteristics.This paper selects quarterly and semi-annual data from March 2003 to June 2016 of companies which got listed between 2003 to 2010 in A share market in China,and uses panel data analysis method,stochastic frontier analysis method,HP filtering method,kernel smoothing,F test and Hausman test,to do empirical test on the quarterly data,semi annual data,different company size data and different company profitability data,respectively without any factor,excluding market factor,and excluding other major factors,such as ownership concentration,the number of shareholders and the equity balance degree.Test results show: for the full sample data,the agent cost presents stable time-varying characteristics over time for a period after the company listing.Individually,the agent cost which between shareholders and managers is approximately M type time-varying characteristic for a period after the company listing,when using the asset turnover as a measure of reverse,presenting,rise first,and reach peak around 2 year,then fall,reach valley around 4-5 year,then rise again,reach peak around 7-8 year,then fall again,and as the time going inflection point will continue to appear.The agent cost between major shareholders and minor shareholders is approximately inverted U type time-varying characteristic for a period after the company listing,presenting,rise first,and reach peak around 4-6 year,then fall.Similarly,the agent cost between shareholders and creditors is approximately inverted U type time-varying characteristic for a period after the company listing too,presenting,rise first,and reach peak around 7-8 year,then fall.However,in the case of agent cost between shareholders and managers,there are still a number of companies may be affected by the size and profitability,and even the manager's personality,so don't fully comply with the time-varying characteristic.In addition,market factors and other major factors will strength and restrain the agent cost fluctuations respectively,the impact of market factors on big companies is stronger than that on small companies,on low profitability companies is stronger than that on high profitability companies,but on the whole there is no significant impact on time-varying characteristics of the agent cost.Why does the agent cost of listed companies have the time-varying characteristic? This paper gives following theoretical conjecture based on the rational choice,listing excitement,and information reflection efficiency.The agent cost between shareholders and managers: first,the mandatory listing conditions lead to the agent cost is relatively low at the beginning of listing.Second,the managers' investment impulse caused by the listing excitement urge the agent cost to increase gradually.After listing,on the one hand,the company's market environment improves significantly,on the other hand,listing itself constitutes the best news,according to the information reflection efficiency,in a relatively stable market,the market price will grow rapidly and excessively in the initial stage.This directly stimulates the manager's investment impulse,at the same time,sufficient funds strengthen the manager's investment impulse too,furthermore,as listed companies,financing costs reduce,investment opportunities increase,therefore managers no longer investment prudently,many risk projects which never be involved in the past may be selected,over-investment becomes very serious,and the agent cost continues to rise.Third,the supervision mechanism such as information disclosure will prompt managers to be dutiful,so the agent cost decreases again.Listed companies need to publish financial reports regularly,and disclosure information that may affect investments,once performance declines or negative news appear,will be captured by the market quickly,consequently affecting the investor's confidence and the company's financing capabilities directly.According to the information reflection efficiency,compared to pre IPO these negative information reflects faster in the stock market,and the effect may also be further amplified,the manager's agent behavior gains much less than loses.Therefore,on the one hand due to the rising cost of financing,on the other hand in order to regain the investors' confidence,but also to deal with the pressure may be from shareholders and external regulation,managers will do their duty again undoubtedly,so that agent cost falls again.At last,the managers' weighing between stealing interests and maintaining positions will make the agent cost fluctuates continually.But there are exceptions,there are still a number of companies may be affected by the size and profitability,and even the manager's personality,so don't fully comply with the time-varying characteristic.For example,compared to small companies,the third inflection point of the M type time-varying characteristics of big companies moves backward,and compared to low profitability companies,high profitability companies don't even appear the third inflection point within the 9 years after listing,so when these features coincide,the time-varying characteristics of the agent cost may change for a big company with high profitability.For another example,a manager is deeply influenced by Confucianism,very honest and righteous,then his moral hazard will become very low,and so the company's agent cost time-varying characteristic should be influenced greatly.The agent cost between major shareholders and minor shareholders: listing is very significant for both major shareholders and minor shareholders,can bring a lot of benefits,if major shareholders affect the listing in order to obtain private benefits of control,obviously the loss outweigh the gain.Therefore forced by the mandatory listing conditions,in order to establish good corporate performance,and get positive support form minor shareholders,major shareholders usually give up private benefits of control in the listing stage,therefore the agent cost between major shareholders and minor shareholders is low in the initial listing.But once listed successfully,facing the exploding wealth,the ability and motivation of the major shareholders to steal the private benefits of control continue to improve,agent cost increases along with it.Until going through the listing stage of excitement,company management tends towards stability,for the company's long-term development,and forced by the continuously improved internal control system.Major shareholders may re-examine the gains and losses of self-serving behavior,reduce the encroachment to minor shareholders gradually.Agent cost decreases correspondingly.But compare to the agent cost between shareholders and managers,the interests of major shareholders encroachment upon minor shareholders are more difficult to detect,related information reflection period may be longer,related information reflection intensity may be weaker,therefore the rising period after listing between major shareholders and minor shareholders may be longer than that between shareholders and managers.The agent cost between shareholders and creditors: on China's actual situation,company listing is very important,it looks like a carp leaping over the Longmen.Relatively strict listing conditions and difficult listing process not only screen companies,but also put on a bright coat for companies,make them leaders in many enterprises.Therefore listed companies are generally favored by the capital market,become the main area of capital investment,especially in the initial listing,huge company potentials attract a lot of capital.The adequate funds inevitably lead to low cost of financing,therefore forming the lower agent cost between shareholders and creditors.But with the company's performance tends towards stability,the accumulated potentials are consumed continuously,the cost of financing increases correspondingly,even above the normal level accompanied by a substantial increase in corporate debt and the accumulation of operating risk.Until going through the listing stage of excitement,company management tends towards stability again,the cost of financing decreases again,the agent cost decreases correspondingly.Relative to the agent cost between major shareholders and minor shareholders,the change of the agent cost between shareholders and creditors depends on the information transfer process from inside to outside,thus the information reflection period get longer,so the change also should be later than the change of the agent cost between major shareholders and minor shareholders.