Equity Agency Costs Amongst Manufacturing SMEs.

The principal objectives in this article is to assess and to build upon the recently published research on making a pioneering attempt to estimate equity agency costs in a large cross-sectional sample of smaller, non-publicly traded companies in the United States. The present research employs panel data for 871 manufacturing small and medium-sized enterprise (SMEs) legally organized as proprietary companies, taken from the Australian federal government's Business Longitudinal Survey conducted over four financial years from 1994-1995 to 1997-1998. The two proxies for equity agency costs that are trialed, operating expense ratio and asset turnover ratio, both appear lower in more complex agency relationships. It is also found that greater enterprise growth is significantly more evident amongst SMEs with more complex agency relationships.