Types I, II, III Agency Problems, Firm Value, and National Governance Quality A Case Study of Indonesian and Singaporean Companies

Abstract

AbstractCorporate governance is mostly studied in developed countries such as the US, UK, and some developed countries in Europe, which focuses on Type I agency problems (shareholder-manager), and there is a dearth of types of agency problems such as type II problems (shareholder-shareholder) and type III problems (shareholder-creditor). Furthermore, the modern financial literature has turned to national governance quality in influencing firm value. So, this research is interested in exploring agency problems I, II, and III affecting firm value with national governance quality as a moderating variable. The research sample was manufacturing companies listed on the Indonesia Stock Exchange and Singapore Exchange from 2016–2020. The findings show that type I agency problem has a significant negative effect and Types I and II agency problem have an insignificant negative effect on firm value in Indonesia. While Types I and II agency problem have a significant negative effect. Still, Type III agency problem has an insignificant negative effect on firm value in Singapore. Moreover, national governance weakens the negative influence of the Type II agency problem on firm value in Singaporean manufacturing companies. Generally, types I, II, and III agency problems give rise to different agency cost levels in companies of a country, so the government needs to reform national governance quality to increase firm value.