Market Competition and Agency Problem: a Study in Indonesian Manufacturing Companies

Ahmad Cahyo Nugroho, Jol Stoffers


This study analyzes agency problems in manufacturing companies’ investment decisions by considering market competition. Investment decisions are important for companies to survive, and more competitive companies are likely to conduct more risky activities, especially regarding capital expenditures for investments. This study uses the dynamic panel data method, which includes annual data of 100 listed manufacturing companies from 2007 to 2016. Results suggest that leverage improves management control functions, and competition increases a company’s investments to maintain its position in the market. Competition is not strengthened or weakened by sales growth and there are indications of herding behavior following market leaders.


Agency Theory, Market Competition, Investment Decision, Manufacturing, Indonesia.

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