Marina Klačmer Čalopa
Karolina Kokot
Ivana Đunđek Kokotec
University of Zagreb, Faculty of Organization and Informatics, Pavlinska 2, 42 000 Varaždin, Croatia


3rd International Scientific Conference – EMAN 2019 – Economics and Management: How to Cope With Disrupted Times, Ljubljana – Slovenia, March 28, 2019, CONFERENCE PROCEEDINGS published by: Association of Economists and Managers of the Balkans, Belgrade, Serbia; Faculty of Management Koper, Slovenia; Doba Business School – Maribor, Slovenia; Integrated Business Faculty –  Skopje, Macedonia; Faculty of Management – Zajecar, Serbia, ISBN 978-86-80194-17-2, ISSN 2683-4510


The main objective of this paper is to examine correlation between agency costs measured by identified approximation of variables and debt financing as one of the corporate governance mechanisms for reducing these costs. In a modern corporation where ownership is separated from management, many benefits are viewed primarily through an increasing efficiency. The issue of the separation of ownership and management is related to potential conflict between principals (stakeholders) and agents (managers). Theoretically possible solution to the agency problem is defined through the agency theory. The most significant problem are agency costs. Agency costs do not have a directly quantifiable value, therefore the approximation of measures such as asset turnover ratio and operating expense ratio (company’s operating expenses divided by its revenues) will be used in this research paper. According to the previous empirical studies, between asset turnover ratio and debt financing positive correlation was determined, while negative correlation was determent between operating expense ratio and debt financing. This research was conducted on Croatian companies whose shares have been listed on the Zagreb Stock Exchange continuously from January 2009 to December 2017. In the analysis, from a total of 154 companies that shares have been listed on the Zagreb Stock Exchange, 31 most actively traded shares measured by the average monthly trading rank in the observed period were taken. Results obtained in this research indicate that debt financing is significant corporate governance mechanism for reducing agency costs where the direction obtained from the correlation is in line with the theoretical expectation.


Agency costs, Corporate Governance, Capital market, Financial leverage, Debt structure.


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