The Analyzing Effective Factors on Agency Costs with Emphasis on the Ratio of Operating Expenses to Sales

The main purpose of the company is acquiring profit or increasing the wealth of shareholders and management is responsible to achieve this goals. In fact Shareholders as owners of the company assign responsibility of acquiring appropriate return on assets to managers and executive compensation is based on their performance. This agency contract is caused agency cost and if the agency costs raised in a firm, the conflict of interest increased in that firm. This research examined the relationship between free cash flow, dividend payments and some of the corporate governance criteria variables (board size, board independence, CEO duality task and institutional ownership) and agency costs with the particular emphasis on the ratio of total operating expenses to sales. Due to the limitations of the research, this article choose 95 companies of listed companies in Tehran Stock Exchange during 2009 to 2013. The result shows that there is a meaningful relationship between free cash flow, dividend payments, board independence, CEO duality task, institutional ownership and agency costs.