The Relationship of Corporate Governance Mechanisms with Costs of the Agencies of Iranian Companies

This study attempts to investigate the impacts of severalcorporate governance mechanisms on two alternative proxies for agencycosts, namely the ratio of total sales to total assets (asset turnover) and theratio of selling, general and administrative expenses to total sales(SG&A). Agency costs, non-executive directors on the board, andinstitutional investors are dependent variables. The analysis is conductedby a cross-sectional regression approach. Findings of the research aredifferent in regard to measuring scales of agency costs. There issignificant relationship between non-executive directors and agencycosts, in regard to asset turnover as a measuring scale, but this is not asignificant relationship for institutional investors. By using the ratio ofoperational expenses to sales as measuring scale of agency costs, there isnot also significant relationship between non-executive directors andagency costs, but this is significant relationship for institutional investors.In regard to combination of reverse ratio of asset turnover and ratio ofoperational expenses to sales as measuring scales of agency costs, there issignificant relationship between non-executive directors and institutionalinvestors with agency costs