Agency costs, board structure and institutional investors: case of India

Purpose - The author examines the role of board structure and institutional investors in dealing with the agency issues for the Indian firms by taking the data of NSE-500 nonfinancial firms for the period 2010–2019. Design/methodology/approach - The author applies dynamic panel data methodology to deal with endogeneity concerns prevalent in corporate finance variables. Findings - The agency view is consistent with the board size in the context of India. The author observed that the board size has a harmful effect on agency cost. A larger board size may create a coordination problem, or CEO may find it easy to thrust his or her decisions on board. The author also noticed that firms should have sizeable institutional ownership, particularly pressure-insensitive investors, in equity as they can reduce agency-related issues. Originality/value - This study focuses on one of the largest emerging economies, i.e. India.