Non-Performing Loans and Operational Fixed-Assets of Main Bank and Agency Costs of Borrowing Firms

Abstract

This paper examines how net income, non－performing loans, and operational fixed－assets of main bank are associated with the agency costs of borrowing firms. Results of this study indicate that the association between non－performing loans and the agency costs of borrowing firms is statistically positive and the association between operational fixed－assets and agency costs of borrowing firms is statistically negative. This implies that non－performing loans and operational fixed－assets of main bank are significantly associated with the agency costs of borrowing firms. Specifically, non－performing loans increase the agency costs of borrowing firms, whereas operational－fixed assets decrease the agency costs of borrowing firms. These results suggest that non－performing loans and operational fixed－assets are significantly associated with not only banks themselves but also the agency costs of borrowing firms. This study contributes to banking literatures that have examined the relationship between main banks and borrowing firms