Seniority,Analyst Coverage And Agency Costs

Agency costs has been attracting strong focus by lots of scholars since 1976.Many scholars believe that the fundamental purpose of the study of corporate governance is to reduce agency costs and reduce the negative effects of agency costs.Maybe due to the difficulties in getting the internal information of listed companies in the open market,a lot of scholars’ study on agency costs gathered in the ownership concentration,equity balance degree and external regulatory environment,and less scholars consider the company’s internal culture,institutional arrangement,competition mechanism and managers’ ability to study their effects on agency costs.Based on the principal-agent theory,upper echelons theory,informal institution theory,behavior theory and adverse selection theory,we used 6,627 observations covering 1,588 private listed companies of Chinese Shanghai and Shenzhen A shares from 2004 to 2013 in this paper to study the relationship between the phenomenon of seniority and agency costs,and the effect of analyst coverage on the relationship between the phenomenon of seniority and agency costs.The results show that,compared to those companies in which the phenomenon of seniority does not exist,the companies in which the phenomenon of seniority does exist perform worse in agency costs;Secondly,the relationship between the phenomenon of seniority and agency costs only exists in those companies that got low analyst coverage.This paper represents a preliminary study for the relationship between the phenomenon of seniority and corporate governance by linking managers and agency costs,meaning the phenomenon of seniority does influence the managers in thinking,psychology and behavior way and ultimately affect the agency costs.The relationship between corporate governance and the phenomenon of seniority is very complicated.We hope this paper can provide promotion for the study on the phenomenon of seniority,and provide a new idea and direction for the future research in the field of corporate governance.