Agency Cost in India Banks

Sanjeev Acharya, Geeta Dupatti, Stuart Locke


Agency cost in Indian banks for the period 2005 to 2013, covering pre-financial crisis, crisis and post-crisis period is empirically examined in the article. It is found that the agency costs, using two measures, vary from one bank to another and change over time. The likelihood of agency cost differing between types of banks indicates that there is a low level of consistency in the results. The choice of metric used is observed to be important as different measures produce different results. The findings also indicate there is low time invariance with respect to agency costs. The source of the agency cost is attributed, at least in part, to the governance of banks during the period analysed.

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