A Valuation Model and Estimation of the Agency Costs

Lee, Won Heum

Korean Journal of Financial Studies 2009;38(1):1-25.
Published online March 31, 2009.

Won Heum Lee

기업가치 평가모형과 대리인비용의 추정에 관한 연구

이원흠

Abstract

As an extension of M&M models(1958, 1961, 1963), I introduce a firm valuation model under the assumptions of the existence of corporate taxes, growth opportunities, bankruptcy costs, and agency costs as well. The model shows that the intrinsic firm values are consisting of four components such as the value of assets-in-place, the value of intangible assets, the value of growth opportunities and the compounding effects of tax benefits, bankruptcy costs and agency costs of the firm. According to the valuation model, I can examine the relations between the corporate governance level and the agency problems by directly estimating the size of the agency costs of the firm. The empirical estimates of the agency costs are summarized as follows. First, the agency costs of companies with good governance systems are about 15% less than otherwise governed companies. Second, the agency costs of companies with high leverage are about 11% higher than those with low leverage. In sum, the governance systems of the companies can contribute to reducing the size of agency costs and then to increasing the intrinsic values of the good-governance companies. And also I can tell that the debt financing will increase the agency costs of debt.

Key Words: 기업가치 평가모형,기업지배구조,내재가치,대리인비용,절세효과,Agency Costs,Corporate Governance,Intrinsic Firm Value,Tax Shields,Valuation Model