The effect of corporate governance mechanisms on the interaction between agency costs and information efficiency of stock prices of companies listed on of the Tehran Stock Exchange

This study investigates the impacts of corporate governance on the interaction between the agency costs and information efficiency of stock prices. In this research, the agency issues measured by the interaction between corporate growth opportunities and its free cash flows. Four corporate governance mechanisms examined in this research are financial expertise and independence of the board of directors, internal audit and institutional shareholders. The sample consists of 130 companies from 1394 to 1400. The results show that agency cost has a significantly negative effect on the information efficiency of stock prices. Moreover, the findings confirm that among the four corporate governance mechanisms, only institutional shareholders significantly moderates the negative effects of agency cost on the information efficiency of stock prices. However, we could not find any evidence on the moderating role of internal auditor, board financial expertise and independence. The results of this research showed that the growth opportunities and free cash flows of companies are among the most important variables affecting the information efficiency of stock prices in the Iranian Stock Exchange.