AGENCY COSTS AND THE PERFORMANCE OF BANKS IN INDIA

Abstract

The article focuses on the agency cost of Indian banks. The researchers have worked on data covering a data period from 2005 to 2013 which covers the pre-crisis, crisis and post-crisis period. Two proxies for agency cost have been taken to arrive at conclusions after applying appropriate tests. It is found that the agency costs vary from one bank to another. Moreover, on applying different metrics for understanding whether the agency cost varies across groups of banks, it is found that there is less consistency in the results. Interestingly, for different measures, different results are arrived at. More importantly, the results show that agency costs for banks change over time. The authors conclude that there is very weak governance in banks in India.