Influence of Debtholder-Shareholder Agency Conflict on the Company Value: Evidence from Emerging Markets

This study carried out an empirical study determining the impact of the agency conflict of creditors and shareholders on the value of the company through investment policy. The study aims at identifying the determinants that affect the likelihood of risk-shifting, which reduce the value of companies from non-financial sector. Under the assumption that risk-shifting occurs immediately after debt issue, the operating risk before and after new debt issue are compared. The key results are the negative relationship between company value and risk-shifting and determinants of the probability of its occurrence. These are the determinants of earnings volatility prior to new debt issue , the effective tax rate and the growth opportunities. Significant differences were identified between the results obtained on samples in BRICS countries. Analysis include two periods: 2 years and 4 years before and after debt issue, which also result in different determinants of risk-shifting. Another finding is that determinants influenced by debt characteristics: such as the issue size and the fact that there weren't any debt issues in two years after study sample. The study identified the determinants independent of the chosen model specification, as well as those that affect risk-shifting depending on characteristics of the company. Keywords: risk-shifting, overinvestment, the company's value