Capital Structure on Agency Costs: Evidence from Indian Public Companies

Abstract

The study aims to provide empirical evidence on the agency costs hypothesis which suggests that increase of leverage may reduce agency costs. Multivariate tests have been employed in this study. The multivariate test tries to reveal the general relationship between leverage and agency costs which is usually negative. The study further tries to assess whether agency costs are significantly different when a firm has a relatively higher debt to asset ratio from when it is less leveraged. Similar supporting evidence is found for the agency costs hypothesis.