Investigation of the effect of agency costs on firm performance of listed firms in Tehran Stock Exchange

Abstract

This study examines the impact of agency costs on firm performance of listed firms in Tehran Stock Exchange. With this aim, main hypothesis and six sub-hypothesis have been designed and tested, with the selection of 73 firms listed in Tehran Stock Exchange during the 5-years period, 2006 to 2010. In this study, three criteria were used including operating expenses to sales ratio, asset turnover to sales ratio and Q-Tobin ratio to measure agency costs and two criteria such as return on assets and return on capital were implemented to measure firm performance. Results of statistical analysis showed that there is a significant relationship between agency costs and firm performance indicating that there are some evidences about verification agency theory in Tehran Stock Exchange.