The relationship between agency cost and corporate performance among manufacturing companies in Malaysia

The effect of agency cost on corporate performance has been long interest to financiers, economists, legal practitioners and business operators. But there is no study in this relationship focuses on the manufacturing companies especially in Malaysia. Therefore, this study aims to investigate the relationship between agency cost and corporate performance among manufacturing companies in Malaysia. Agency cost are measured by five independent variables namely leverage, size, growth, expense and efficiency. While corporate performance is measured by Return on Equity (ROE). This study used secondary data from public listed manufacturing companies listed in Bursa Malaysia. From total population of 457 manufacturing companies listed in Bursa Malaysia, 130 (28%) firms for sample was taken covering over period of 5 years from 2012 to 2016. The relationship between agency cost and corporate performance in this study is analyzed by performing regression analysis of panel data. The results show that three out of five proxy of agency cost are significantly related to corporate performance which measured by ROE. The three variables that are significantly related with Return on Equity (ROE) are efficiency, leverage and size. The other two variables that are found not significant related with corporate performance (ROE) which are company growth and expense. Hence the study found that agency cost to be significantly related with corporate performance.