Javad MOradi; Ahmad Rahmanian
Volume 10, Issue 40 , January 2014, , Pages 125-150
Abstract
Managers' tendency to overinvestment is one of the agency costs that due to conflict of Interests between managements and shareholders the firms are encountered with. Whilesuchactivities increase personal interestsof managements, they will reduce the firm value. Increasing the debt is a potential solution ...
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Managers' tendency to overinvestment is one of the agency costs that due to conflict of Interests between managements and shareholders the firms are encountered with. Whilesuchactivities increase personal interestsof managements, they will reduce the firm value. Increasing the debt is a potential solution for the overinvestment problem. This study investigates the impact of long term debts on overinvestment (with respect to cash and capital expenditures) and also, it examines the impact of growth opportunities on this overinvestment.The statistical society of this research includes companies accepted in Tehran Stock Exchange (TSE) andthe sample consists of 90 firms which are selected based on some constraints for the period of 1379 to 1389. Regression analysis and t-test are utilized to examine the hypothses.The resultsshow that there is a negative and significant relationship between long-term debt changes and overinvestment (in cash and capital expenditure) and the mean of overinvestment in cash and capital expenditure in firm with less growth opportunities, is more
Mohammad Namazi; Javad Moradi
Volume 3, Issue 10 , July 2005, , Pages 73-101
Abstract
In today's developed corporations, because of multiplicity of owners, direct monitoring of managers' performance is impossible, but this group only realizes the released benefits. Therefore, it is reasonable that they use governance mechanisms, for monitoring and optimal controlling behavior of hired ...
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In today's developed corporations, because of multiplicity of owners, direct monitoring of managers' performance is impossible, but this group only realizes the released benefits. Therefore, it is reasonable that they use governance mechanisms, for monitoring and optimal controlling behavior of hired managers. One means in reaching this purpose is rewarding managers based on their performance and motivating them, in accordance with the firm's purposes, in the manner discussed in the agency theory.
The main purpose of this paper is to examine the agency theory implications to isolate market determinants of board of director's bonuses, on the basis of data collected from Tehran's Securities Exchange (TSE) market for 1378 to 1382. For this purpose, by utilizing a regression model, board of director's bonus for selected corporation, were related to some accounting and market-based performance measures as well as some fixed variables (with respect to performance) such as the firm's size and the ownership concentration.
The results at the level of all corporations suggest that there is a significant relationship between Return on Assets (ROA) ratio and its changes, firm's size, ownership centralization, financial risk and board of directors' bonus. At the industry level, both the firm's size and ROA ratio were used more than the other selected variables. By substituting "changes in bonus" for the bonus itself, the explanatory power of the model used, was weakened. In this stage, the only variable that is significantly related to changes in bonuses is the ROA ratio.
