INDUSTRY COMPETITION, AGENCY PROBLEM, AND FIRM PERFORMANCE

Abstract

The study investigates the relationship between industry competition and firm performance in relation to agency problem conditions. At the same time, the literature also stated that different levels of national corporate governance have different impacts on corporate performance. We also investigate whether or not the relation between industry competition and firm performance would be different under different levels of agency problem. Our empirical results show that the positive relation between industry competition and firm performance is relatively significant for firms with higher free cash flows that present severe agency problems. The results do not change under different levels of national corporate governance.