This study addresses how agency costs influence the sustainability of different types of corporate governance. The luxury fashion brand could spend large sums of money on maintenance of magnificent brand image, thereby increasing the agency cost. On the contrary, the brand may hold down wasteful spending to report a gaudily financial achievement. Agency costs are defined either to vertical costs arising from the relationship between stockholders and managers, or to horizontal costs associated with the potential conflicts between majority and minority stockholders. Agency costs are measured by the value of the principal component. The study conducted regression analysis of each agency cost index, luxury fashion brand dummy and a set of control variables. The findings show that the agency costs of the firms with luxury fashion brand exceed those of control group.

Motivated by the recent cases of negligent social responsibility as manifested by foreign luxury fashion brands in Korea, this study investigates whether agency costs depend on the sustainability of different types of corporate governance. Agency costs refer either to vertical costs arising from the relationship between stockholders and managers, or to horizontal costs associated with the potential conflicts between majority and minority stockholders. The firms with luxury fashion brand could spend large sums of money on maintenance of magnificent brand image, thereby increasing the agency cost. On the contrary, the firms may hold down wasteful spending to report a gaudily financial achievement. This results in mitigation of the agency cost.

I investigate whether the efficient ratios used as the proxies of the agency costs maintained by Ang et al.(2000) is significant. Utilizing a sample of 77 manufacturing companies listed on the KOSDAQ from the TS2000 of the KSDA, The results are as follows