Impact of Corporate Ownership Structure on Agency Costs: Evidence from Sri Lankan Listed Firms

Over the last decade, the corporate ownership structure and agency cost has been an important topic and discussion among research and business community. However, to what extent the ownership structures matter for mitigating agency costs still needs to be resolved. This study empirically investigates the role of different ownership structures in dealing with agency issues for Sri Lankan non-financial firms from 2015 to 2019. The panel data method was used to examine the impact of agency cost on ownership structure. The authors found a consistent view of the relationship between agency cost and ownership structure. Accordingly, the results explained that managerial ownership facilitates mitigating agency issues. The authors also noticed that larger firms could reduce agency costs by having sizable institutional or concentrated ownership. While in the case of small firms, foreign ownership alleviates agency costs. The study would help firms' stakeholders, particularly managers, owners and investors, make the right investment decisions.