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  • Essay / Corporate Finance Case Study - 2454

    The first concerns the percentage of non-executive directors (NXRATIO). Many studies support the use of non-executive directors because they are more likely to act on behalf of shareholders. Consequently, the higher the percentage of non-executive directors on the board of directors, the lower the costs of the Agency, as in the first hypothesis. Second, duality (DUALITY) is unenviable because it gives a person the potential ability to disrupt the company's decision-making process. Separating the CEO and president should therefore reduce agency costs. Third, the creation of subcommittees of the board of directors. There are several subcommittees of the board, but only the nominating committee, which includes non-executive directors, will be studied. As mentioned previously, a non-executive director should influence shareholder behavior, the presence of a nomination committee (NOMCOM) and the presence of an executive director on the nomination committee (NOMXD) should reduce the costs of agency. The tenure of the CEO (CEOTENURE) is considered to be the longer he holds the position, the more power he will have, leading to increased agency costs. The last hypothesis is that the higher the number of additional mandates held by the CEO (BUSYCEO), the lower the agency costs due to the better reputation and the positive impact on company performance. McKnight and Weir (2009) do not build hypotheses solely on edge characteristics,