Wang [2010] tested the effect of free cash flows and agency costs on the financial performance

of the companies. In this study, a sample of 505 companies listed in the Taiwan Stock Exchange

is used during the period 2002-2007 In the present study, six measures were used as an indicator

of agency cost. Summary of the obtain result of hypotheses testing are as follows; (1) there is

significant and positive relationship between the three measures of agency cost (total assets

turnover, ratio of administrative costs and the ratio of advertising and R&D cost) and firm

 performance measures (return on assets and return on equity) and there is significant and

negative relationship between the operating cost ratio (as another measure of the agency cost

measures) and firm performance indicators But significant relationship is not observed between

the other two measures of agency cost (operating income volatility and net income volatility) and

 performance indicators. (2) There is significant and positive relationship between free cash flows

and accounting measures of firm performance evaluation (3) there is significant and positive

relationship between control variable of firm size and profitability measures, but there is

significant and negative relationship between the control variable of debt ratio and profitability

indicators

Sheng Xiao (2009) This paper examines the effects of the agency costs on firm value in 156

Chinese

 publicly listed companies with individual ultimate owners between 2002 and 2007.

The ultimate owners’ agency costs, as measured by the divergence between control 

rights and cash flow rights, are shown to negatively and significantly affect firm value,

as measured by the market-to- book ratio of assets (an approximation of Tobin’s Q). As 

the agency costs grow, the stock returns decrease around the connected party

 

transaction announcements, and firms are more likely to engage in value-destroying

connected party transactions. These effects are particularly strong for some types of

connected party transactions, notably loan guarantees and direct fund transfers.

Further, as the agency costs grow, the firms violate laws more frequently and the

nature of legal violations becomes more severe. Evidence from an exogenous policy

shock, the non-tradable share reform confirms that higher agency costs cause more

unfavorable stock market reactions to connected party transaction announcements

Abbasali Pouraghajan et al (2012) Therefore, the present study investigated

the relationship between free cash flows and agency costs on the performance of listed

companies in Tehran StockExchange, on a sample of 140 companies during the time span of

2006-2011. There is significant relationship between operating costs ratio and firm performance.

The results obtained from the above hypothesis test for return on assets model (ROA) is shown

that there is

negative(-0.3426) and significant relationship between the operating costs ratio (OpeR) and

return on assets at error

level less than 1%. However, the results obtained from the return on equity model (ROE)

indicate that there is no

significant relationship between the operating costs ratio and return on equity. Thus, the third

hypothesis is

confirmed only for return on assets model.