The Effects of ESG Management on Agency Costs: A Data Analysis of the KOSDAQ Market

Purpose: The purpose of this study is to verify the effect of a company’s ESG management on agency costs. For this purpose, the dependent variables used in this study were the asset turnover variable representing the level of effort of the manager, the entertainment cost ratio representing the private consumption of the manager, the sales and management cost ratio, and the surplus cash flow ratio. If the company’s agency cost expenditure is affected by the influence of the company’s ESG management, the importance of the company’s ESG management is proved. Research design, data, and methodology: As a result of the verification, it was confirmed that a company’s ESG management activities had a positive effect on the company’s asset turnover rate. These results indicate that the company’s active ESG management activities contribute to increasing the company’s asset turnover rate by properly controlling the discretion of the manager. Second, some valid results were derived from the result of selecting the entertainment cost ratio as a substitute for agent cost. On the other hand, significant results were not found in the sales cost, management cost, and surplus cash flow model. Results: This research results are as follows. First, service orientation of salespeople was found to have a positive effect on customer’s economic value. Second, it was found that the customer orientation and service orientation of the salespeople had a positive effect on the psychological value, and sales orientation was found to have a negative effect on the psychological value. Third, it was found that economic value and psychological value had a positive effect on customer satisfaction. Implications: In conclusion, it was partially confirmed that the KOSDAQ market is playing a positive role in the company’s management performance by properly controlling agent costs through ESG management activities. These results will serve as a basis for improving the company’s management performance by establishing a mechanism that can reduce agent costs within the company, and it is also believed that it will serve as a basis for policymakers to come up with a plan for the natural establishment of such a control system within the company.