Determinants of leverage and agency problems: A regression approach with survey data

Abe De Jong, Ronald Van Dijk

Research output: Contribution to journalArticleResearchpeer-review

21 Citations (Scopus)


This paper reports on empirical investigations of the determinants of leverage and agency problems. Use is made of private data obtained through questionnaires, and a regression model is estimated in which leverage and four agency problems are explained, i.e. direct wealth transfer, asset substitution, underinvestment and overinvestment. The application of regression analysis on survey data is novel in finance. Therefore, this paper contains an in-depth description of the research methods. Results for a sample of Dutch firms confirm that the trade-off between tax advantages and bankruptcy costs determines leverage. Free cash flow and corporate governance characteristics appear to be determinants of overinvestment. Despite finding that agency problems are present, no evidence is found for direct relations between leverage and the agency problems.

Original languageEnglish
Pages (from-to)565-593
Number of pages29
JournalEuropean Journal of Finance
Issue number6
Publication statusPublished - 1 Sep 2007
Externally publishedYes


  • Agency problems
  • Capital structure
  • Corporate governance
  • Survey research
  • The Netherlands

Cite this