An empirical study of equity agency costs and internationalization: Evidence from Taiwanese firms

Under methodologies of the event study procedure and the multiple regression analysis, this study investigates equity agency costs and internationalization, using a Taiwanese sample from 2000 to 2004. The evidence shows that the shareholder wealth effects of security offering announcements are unfavorable for higher equity agency costs, especially unfavorable for higher equity agency costs of foreign-exposed multinational corporations (MNCs) because internationalization renders monitoring more difficult in comparison to domestic corporations (DCs). This study suggests MNCs to increase their information transparency in order to achieve lowered equity agency costs, and help to reduce informationasymmetry, thereby enablefirmsto raise capital on the best available terms. (C) 2009 Elsevier B.V. All rights reserved.