The Effect Of Leverage On Agency Costs In Banking Companies Listed On The Indonesian Stock Exchange (Dividend Policy As A Mediating Variable)

Mohammad Rizqi, Sri Lestari, Intan Shaferi, Fristanto Ary Wibowo

Abstract


The issue of agency cost in companies has prompted this study to explore the effects of leverage, dividend policy, managerial ownership, institutional ownership, and independent commissioners on agency cost in banking companies listed on the Indonesia Stock Exchange. Agency cost arises from agency conflicts due to differences in incentives and objectives between company owners and managers. This research is quantitative and uses purposive sampling, resulting in a total of 43 samples with 215 data points processed using the Warp PLS method. The results indicate that leverage has a positive effect on agency cost, and leverage also positively affects dividend policy. Dividend policy is found to increase agency cost by reducing cash available for investment and operations. Additionally, dividend policy can mediate the effect of leverage on agency cost by reducing uncertainty and increasing stakeholder trust. Managerial ownership negatively affects agency cost, while institutional ownership and independent commissioners do not have a significant effect. These findings highlight the importance of strengthening corporate governance mechanisms to reduce agency cost and enhance the long-term performance and stability of banking companies.

Keywords: Leverage, Dividend Policy, Agency Cost, Institutional Ownership, Managerial Ownership, Independent Commissioners.


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