HOW EXTERNAL CORPORATE GOVERNANCE AFFECTS SEOS PERFORMANCE: MEDIATING EFFECT OF AGENCY COSTS

Abstract

In an analysis of moment structure (AMOS) setting, this study investigates the effectiveness of external corporate governance in mitigating agency costs and enhancing long-term operating performance for seasoned equity offerings (SEOs). Additionally, this study hypothesizes the crucial and mediating role of agency costs in the relationship between governance structure and post-SEO operating performance. The results reveal that the mediating role of reducing agency costs is crucial to the causal relationship between external corporate governance and post-SEO performance, indicating external corporate governance can enhance performance through direct positive influence on firm performance and, more importantly, through indirect negative influence to decrease agency costs.