Agency costs and credit availability: an international study

Purpose This paper aims to investigate the link between agency costs mitigation via three levels of rights protection (minority protection, enforcing contracts, resolving insolvency issues) provides propitious climate for financing investment opportunities around world. Design/methodology/approach We use Bartlett’s three-group method stratify countries based on how well they protect investors as measured by scores provided in Doing Business dataset developed world bank 189 countries. then test a variety independent hypotheses that alleviation investors’ rights, contract enforcement, is associated with better access credit banking system, valuation listed firms stock market and higher growth. Findings Our findings support Agency Theory which explains why absence legal external leads markets financial institutions failing fulfill their role economy. Practical implications The policy implication from this study indicates ought (1) develop legislation protects (2) improve quality judicial system terms (3) build framework disputes during these are important ingredients system. Originality/value World new methodology quantify significance relationship minority ineffective lack bankruptcy laws firm sector market. It evidence country matter firms’ ability raise enhance value creation.