ANALYSIS OF FACTORS AFFECTING AGENCY COST OF MANUFACTURING COMPANIES LISTED ON INDONESIA STOCK EXCHANGE

Abstract

The purpose of this research was to examine the impact of ownership structure, dividend policy, firm size, and capital structure on agency cost. The sample that was used in this research consisted of 32 manufacturing companies listed on Indonesia Stock Exchange in 2010 and 2011. This study used simple linear regression analysis to test the data. Using the convidence interval of 95%, statistical results show that the insider ownership and the capital structure have significant and negative impact on the agency cost. On the other hand, it is found that the institutional ownership has significantly positive impact on the agency cost. However, researcher found no evidence that the dividend policy and firm size have significant impact on the agency cost. These results could be considered as one of the criteria to create proper corporate governance for firms’ management as well as investment criteria for investors.