Correspondence to dewimaryam@stiesia.ac.id Received: 15 September 2019 Accepted: 25 November 2019 Published: 16 December 2019 JURNAL AKUNTANSI, MANAJEMEN DAN EKONOMI Vol.21, No.3, pp. 54-60 Published online in http://jos.unsoed.ac.id/index.php/jame ISSN: 1410-9336 / E-ISSN: 2620-8482 INTRODUCTION There are several sectors of manufactur- ing companies in Indonesia, for example: base industry and chemical sector, diverse industry and consumer goods industry sec- tors. Companies on consumer goods have significant impact due to the community’s buying power as the result of GDP growth, interest rate, and a nation’s macro economy performance (Wulandari, 2012). With the supporting conditions, companies on the sec- tor of consumption goods industry in Indone- sia are attempting to benefit from existing opportunities in order to gain profit by improv- ing their sales levels. The usages of capital and debt are con- sidered as the early stage of establishing a company. Brigham and Houston (2001) state that financial capital structure is an alternative way that can be used to improve profit. The application of debt for investment as an addi- tional way to finance company assets is per- ceived to advance company profit. The com- pany assets can be used to generate profit. Therefore, the profit available for equity hold- ers becomes larger (Brigham & Houston, 2001). When the interest expense is enor- mous, the operational profit is not adequate. So the financial difficulty problems will arise and lead to the declining company perfor- mance. However, debt interest expense can also be seen as tax reduction which can in- crease company value (Brigham & Gapenski, 1997). In brief, it is safe to say that debt can increase a company performance. A company that is considered as a large size is one that involves large assets and on- ly need discretionary expense. The discre- tionary expense againts net sales is the proxy to measure agency cost. With the reduction of discretionary expense, the company per- formance will improve, and the company prof- it will increase (Jensen & Meckling, 1976). In addition, a company performance pre- sents the company ability to generate profit from assets, equity, and debt. Company per- formance is defined as the company’s work- ing achievement. Another way to measure a company performance can be applied with Return on Equity (ROE). This is the meas- urement on company profitability that is im- portant to measure the return to shareholders Agency Cost as An Intervening Variable in the Impact of Capital Structure and Company Size on Company Performance Dewi Maryam1, Yesa Cahayaning Ramadhani2 1,2Sekolah Tinggi Ilmu Ekonomi Indonesia, Indonesia Abstract This research was aimed to examine agency cost as an intervening model between capital structure and company size towards the company's performance. Data was collected through non participatory observation method using criteria on issuing consecutive financial statements within the research period. Having the complete financial data that was consist- ently needed during the research period. The company was not listed during the research period. In this study, the data analysis was conducted using quantitative data analysis with compared ratios and path analysis. The analysis was used due to its possibility of inter- variable relationships in a linear model. The research hypotheses were the effect of capital structure on the company performance, the company size on the company performance, the capital structure of agency cost, the company size on agency cost, and the agency cost on the company performance. As the results, there were direct impact of capital structure, company size, and agency cost on the company's performance. In contrast, there was an indirect impact of capital structure, the size of the company on the company's performance through agency cost as the intervening variable.. Keywords Discreationary Expense, Return On Equity (ROE), Leverage, company size (Size) JURNAL AKUNTANSI, MANAJEMEN DAN EKONOMI, VOL 21, N0 3, 2019, 54-60 (Jones, et al, 2009). Indeed, there are several functions in a company, for example: the or- ganization function and the ownership func- tion. Accordingly, Jensen and Meckling (1976) state that the separation of organiza- tion function and the ownership function is vulnerable to agency conflict. Agency conflict occurs when a manager tends to make deci- sions that is profitable to himself rather than to the shareholders (Jensen & Meckling 1976, Myers 1977). Agency conflict may cause agency cost, which is the adequate incentive given to the manager as well as the supervision costs to avoid hazard. Agency conflict may occur between shareholders and managers as well as between shareholders and creditors (Husnan, 2001). A company can be financed by debt and equity. The debt finances a company that is not always similar to liabilities and payable. The debt that causes interest expense may reduce tax. In other words, interest expense can be reduced from income so that profit before tax becomes lower and the tax be- comes smaller. If the funding uses equity, there will be no expense that can reduce company tax. Referring to the explanation regarding the effects of company profit, capital, debt, com- pany asset, and discretionary expense, this research is conducted to investigate agency cost as a an intervening model of capital structure and company size to company per- formance. THEORETICAL FRAMEWORK Capital Structure Capital structure is the permanent funding that consists of long-term debt, preferred stock, shareholder capital. Book value of shareholder capital includes common stock, paid-up capital or surplus, retained capital and accumulation. Capital structure is a part of financial structure (Sawir, 2005). According to Sjahrial (2008), the capital structure is the permanent funding that involves long-term debt, preferred stock, shareholder capital. In general, the capital structure of a company consists of several components. Moreover, the long-term debt is a debt with repayment due date for more than 10 years. This com- ponent includes mortgage and obligation debts. Then, the shareholder capital includes preferred stock and common stock. Company Size Brigham and Houston (2001:119) define company size as the average of total net sales for that year up to several years. Com- pany size is the characteristic of a company that is related with the company structure. According to Jones, et al (2001) company size is described as how big or how small a company is of which can be seen from how big or how small capital that is used, total asset that is owned, or total sales that is gained. Agency Cost Agency relationship is a contract of which there is a person or more investors (that is called as the principal) and another person (that is called as the agent) to take action on behalf of the principal and upon whom is giv- en the authority to make decisions. The sepa- rating ownership function and organization function may cause agency conflict since the separation can create conflict of interest be- tween shareholders and company manager. Agency problem between shareholders and manager potentially occurs when the manag- er does not own the majority of stock in the company. The shareholders perceive the manager to work for maximum wealth of shareholders. However, it is possible for the manager to act not for the interest of share- holders but for his own interest and wealth, work safety and other benefits, and charge them to company expense (Jensen & Meck- ling, 1976). Company Performance Company performance is the whole state display of a company in certain period of time, which is the result or achievement af- fected by company operational activities in using its owned resources (Helfert, 1996). Performance is a term used for a part of or all actions or activities of an organization within a period with reference to standard amount of past or projected expenses, based on man- agement efficiency, responsibility or account- ability (Ceacilia, 2004). Previous Researches There are several previous researches used as reference of this research. For ex- ample, a research conducted by Patti (2006) who investigate capital structure and compa- ny performance as a new approach to agen- cy cost theory and its application in banking industry. This includes a theory of company governance that predicts leverage affecting JURNAL AKUNTANSI, MANAJEMEN DAN EKONOMI, VOL 21, N0 3, 2019, 54-60 agency cost and company performance. They also propose a new approach to exam- ine this theory by using profit efficiency, or how closed a company is. Profit must be based on the best practice of a company in regard with the same exogenous condition. They also become the first research in using simultaneous equation model that contributes to the reverse causality of performance to capital structure. Finally, they find that the data in US banking industry is consistent with the theory, and the result is statistically signif- icant and economically strong. Hypotheses The Effect of Capital Structure on Agency Cost The relation between debt and agency cost in capital structure is mentioned by Jen- sen and Meckling (1976). The use of debt creates supervision from external parties or the bank which can motivate the manager to operate the company more efficiently. In this way, agency cost decreases and company performance increases. Based on that state- ment, the research hypothesis can be formu- lated as follows: H1: capital structure (leverage) affects agency cost. The Effect of Company Size on Agency Cost The relation between debt and agency cost in capital structure is mentioned by Jen- sen and Meckling (1976). The use of debt creates supervision from external parties or the bank, which can motivate the manager to operate the company more efficiently. In this way, agency cost decreases and company performance increases. Based on that state- ment, the research hypothesis can be formu- lated as follows: H1: capital structure (leverage) affects agency cost. The Effect of Company Size on Agency Cost Fachrudin (2011) finds in his research that company size has a negative significant ef- fect on agency cost. If the company size im- proves the economic scale, performance will probably increase through expense reduc- tion. Therefore agency cost will decrease. Based on that statement, the research hy- pothesis can be formulated as follows: H2: Company size affects agency cost. The Effect of Capital Structure on Company Performance The use of debt in investment as an additional way to finance company assets is expected to improve company profit, as com- pany assets can be used to generate profit. Debt causes interest expense. Interest ex- pense is a tax reduction which can increase company value. In this way, it is safe to say that debt can increase performance. Based on that statement, the research hypothesis can be formulated as follows: H3: Capital structure (leverage) affects company performance. The Effect of Company Size on Company Performance Lin (2006), Wright et al. (2009), and Calisir et al. (2010) find that company size has posi- tive effect on company performance. This indicates that good performance in big com- panies is more promising. Instead, Talebria et al. (2010) finds that company size has no effect on company performance. Based on that statement, the research hypothesis can be formulated as follows: H4: Company size affects company per- formance. The Effect of Agency Cost on Company Per- formance Interest expense that is one of the com- ponents of discretionary expense can reduce tax which leads to the improvement of com- pany performance. When discretionary ex- pense decreases, company profit will im- prove, so the company performance will also increase. Fachrudin (2011) and Immanuela (2014) find in their research results that agency cost has no effect on company per- formance. Based on that statement, the re- search hypothesis can be formulated as fol- lows: H5: Agency Cost (discretionary expense) affects company performance. METHOD This section presents types of research, research time and place, research tar- get/subject, procedure, data, instrument, and data collection technique, data analysis tech- nique. This research applies an explanatory re- search that aims to explain the relations be- tween variables, such as: capital structure, company size, agency cost and company performance of manufacturing companies in the sector of consumer goods which are listed in Indonesia Stock Exchange through hypothesis test and explanatory. The deter- JURNAL AKUNTANSI, MANAJEMEN DAN EKONOMI, VOL 21, N0 3, 2019, 54-60 mination of explanatory research is in regard with Sekaran (2006). This research is con- ducted with the intention of explanatory and confirmation by providing causal explanation or relations between variables through hy- pothesis test. This research includes manufacturing companies in the sector of consumption goods who have been publicly acknowledged in the Indonesia Stock Exchange during 2013 to 2017. The samples used in this research are saturated samples of which all members of research population are used as research samples. This research is an explanatory research. Its determination is due to what is described by Sekaran (2006) in the intention of explana- tory and confirmation, by providing causal explanation or relations between variables through hypothesis test. The type of data in this research is sec- ondary data. The data is collected from the finished forms of data, including publication and documentary. The secondary data were collected from Indonesian Capital Market Di- rectory (ICMD) and annual reports of manu- facturing companies in the sector of consum- er goods from 2010 to 2014 that were col- lected from Indonesia Stock Exchange at Brawijaya University. The stages of data col- lection are as follows. First stage is conduct- ed by collecting the necessary secondary data consisting of financial reports from Indo- nesian Capital Market Directory (ICMD) of manufacturing companies in the sector of consumer goods and attachments of financial reports in relation to this research. The sec- ond stage is conducted by calculating the necessary variables, such as capital struc- ture, company size, agency cost, and com- pany performance taken from financial re- ports and Indonesian Capital Market Directo- ry (ICMD). All data are then analyzed. The data analysis technique that is used in this research is path analysis. This aims to analyze the relational pattern between varia- bles to find out the indirect effect of inde- pendent variables on dependent variables that are mediated with intervening variables. Before processing data, this study should firstly be free from classic assumption test. Classic assumption test is conducted to esti- mate model parameter value to be declared valid. The classic assumption test should also be fulfilled are normality assumption test, au- tocorrelation, multicollinearity, and hetero- scedasticity. RESULTS AND DISCUSSION Based on the theoretical framework, the empirical data and analysis of research re- sult, the relations of capital structure, compa- ny’s size with agency cost and company per- formance can be discussed as follows. The Effect of Capital Structure on Agency Cost Capital structure is measured by using long-term debt against equity that induces fixed expense for company. According to Mahendra (2011) capital structure is the per- manent expense reflecting the balance be- tween long-term debt and the company’s own capital coming from both internal and external sources. Capital structure that is the most suitable for company with high growth level is different from company with low growth level. Company with high growth level, in its rela- tion with capital structure, should apply equity as its financing source to avoid agency cost between shareholders and company man- agement; on the contrary company with low growth level should apply debt as its financ- ing source as the use of debt will require the company to pay the interest regularly. Paying the interest regularly will reduce the interest expense which leads to minimizing discre- tionary expense which in this research is used as the agency cost proxy. Agency theory explains that a company is vulnerable to agency conflict that is resulted by the difference in interest of manager and owners or shareholders. In order to resolve agency conflict, agency theory describes two ways to control the company by increasing manager ownership to align owner’s interest and by using debt as a control against man- ager (Jensen & Meckling, 1976). This research also finds that the direct ef- fect of capital structure on agency cost is an insignificant one. The descriptive statistical analysis shows that the value of agency cost is higher than capital structure, which indi- cates that the company in conducting its op- eration uses more discretionary expense (operational expense, non-operational ex- pense, interest expense, salary and wages) against net sales than debt. Therefore, the value of R square of capital structure to agency cost is small, showing that agency cost is not able to affect capital structure. This is due to the manufacturing companies in the sector of consumer goods using more of its own capital than its debt. The result of this research is in line with Immanuella (2014) that capital structure does not have an effect on agency cost. In con- JURNAL AKUNTANSI, MANAJEMEN DAN EKONOMI, VOL 21, N0 3, 2019, 54-60 trast, it is not in line with researches which are conducted by Fachrudin (2011) and by Campbell et al (2003) that capital structure has a significant effect on agency cost. The result of this research is also in accordance with the theory defined by Brigham and Daves (2004) stating that the high use of debt in capital structure may bring bankruptcy to the company which can reduce agency cost as manager will cut less important cost to be able to pay company’s debt. However, the result of this research is not in line with the theory by Jensen and Meckling (1976) and Cao (2006) arguing that the use of debt in capital structure may prevent any unneces- sary cost and encourage the manager to op- erate the company more efficiently. The Effect of Company Size on Agency Cost Brigham and Houston (2001) define com- pany size as the average of total net sales for that year up to several years. Company size is the characteristic of a company that is re- lated with the company structure. According to Jones, et al (2001) a company size de- scribes how big or how small a company is which can be seen from how big or how small capital that is used, total asset that is owned, or total sales that is gained. For this, Oyelere et. al. (2001) explain that company size is the proxy for several company characteristics that several reasons have been mentioned in literatures supporting the relation between company size and information disclosure conducted by companies. In this research, company size is measured from total asset owned by a company. The total asset is de- fined as all resources that are owned by a company as the result of past transactions and is expected to give future economic ben- efit for the company (IAI, 2009). According to Jensen and Meckling (1976), the agency cost is the prices incurred by companies to minimize agency conflict. Agency cost is proxied by discretionary ex- pense ratio. Discretionary expense is the ex- penditure incurred based on a manager’s discretionary. This expense includes opera- tional expense, non- operational expense, interest expense, salary and wages. There- fore, when a company uses more of its total asset, the use of discretionary expense will be less. The negative value of coefficient path in- dicates that the bigger the company size, the less the agency cost tends to be. On the con- trary, the smaller the company size lead to the more the agency cost. In this research, the company size has a negative effect on agency cost. The indications are drawn that 1) big companies can wisely organize the discretionary expense for efficiency, 2) the existence of economy scale, and 3) big com- panies have bigger net sales rather than small companies. Moreover, this study find that the direct ef- fect of company size on agency cost is a sig- nificant one. This is supported by the result of descriptive statistical analysis which figures out the dominant or high company size value. This can be concluded that the company us- es the big total asset to lead for discretionary expense. The test result is in line with find- ings of Lin (2006). This research is also in line with Zhang and Li (2008) who find nega- tive significant effect of company size on agency cost. Big company size requires small discretionary expense. Moreover, big compa- nies attract more attention and they are au- tomatically under bigger public observation. In other words, the big companies have to disclose larger information in order to reduce agency cost. Therefore, such situation demands com- panies have enormous responsibility to both public and government, to operate with high professionalism, which can decrease the agency cost. The Effect of Capital Structure on Company Performance Capital structure can be used as an exter- nal control tool in the effort of achieving com- pany goals which are maximizing company performance and reducing the chances for a manager to act against shareholders’ interest (Jensen, 1996). Capital structure is measured using debt against equity. The debt is em- ployed as a control by shareholders in order to make the manager more responsible in organizing the company. When a company falls into bankruptcy, a manager may lose their job. Obviously, a company performance is the ability of a company in organizing its existing resource which gives value to the company. By finding out the performance of a company, one can measure the efficiency level and productivity of the company. The measurement of company performance can also be essential to address a company de- velopment. In this research, the company performance is measured using net profit against equity. Brigham and Houston (2001) state that fi- nancial capital structure is an alternative way to increase profit. The use of debt in invest- JURNAL AKUNTANSI, MANAJEMEN DAN EKONOMI, VOL 21, N0 3, 2019, 54-60 ment is considered as an additional way to finance company assets. This is expected to improve company profit, since the company assets can be used to generate profit. Debt causes interest expense. Interest expense can reduce tax which can increase company value that will increase company perfor- mance. While according to theory by Jones et al. (2009), the capital structure can increase yields for shareholders (favorable leverage), but it can also be harmful to shareholders (unfavorable leverage). The result of this research indicates that the direct effect of capital structure on com- pany performance is not a significant one. From the descriptive statistical analysis, the capital structure with a value is presented lower than the company performance. This indicates that the company uses its own capi- tal more than its debt. Therefore the company cannot reduce interest expense which cause the increasing tax and lead to the decreasing company performance. Accordingly, this re- search is not in line with the theory of Jones et al. (2009) stating that capital structure af- fects company performance since debt fi- nancing creates interest expense that must be paid. The research cannot show that the capital structure can lower yields for share- holders. This means that debt financing is not used effectively which leads to less profit. From the indirect result in Table 5.12, this study convinces that agency cost cannot moderate the capital structure to company performance. When the capital structure af- fects company performance, the result is not significant. This means that the leverage which uses debt is not effective in Indonesian manufacturing companies, particularly in the consumer goods industries. This indicates that the use of debt is not a factor that can improve company performance. This will de- crease a company profit as the company per- formance is decreasing since the manager who is also a shareholder does not use debt effectively. In turn, this will affect the manag- er’s own wealth. Debt can be the control for a manager who makes decisions not to de- crease company profit. The Effect of Company Size on Company Performance The size of a company can be measured through the company’s wealth or assets. In this study, the measurement on company refers to the natural log of total asset. A big company with large asset can gain larger ac- cess to get funds in capital market than a small company, which can be used in com- pany operations. This larger access may en- able company to improve productivity which leads to company performance advance- ment. Company assets are generally prac- ticed to measure the size of a company. Moreover, company assets represent the rights and obligations as well as the company capital. A company which is determined big in size is generally known to have big assets. The asset turnover of big companies tends to be faster due to the considerable amount of sales. More sales means that company per- formance is more productive. Then, the com- pany performance is measured by using net profit against equity. Furthermore, this research results that the direct effect of company size on company performance is not significant. From the descriptive statistical analysis, the value of company size is seen lower than company performance. Owing to all companies pos- sess large assets, they depend more on capi- tal in order to improve company profit. Thus, this research is not in line with the finding of Gray et. al, (2008) stating that big companies will reveal more information than small com- panies. The research result is not accordance with research of Immanuela (2014) arguing that companies with big assets represent the company stability. In brief, the well-established companies usually have a stable financial condition. The big company can raise the economy scale and reduce information collection and pro- cessing cost. A big company with big re- source will conduct larger information disclo- sures and will be able to afford financing the information availability for internal needs. The information availability can also be used to provide facts for external parties, such as: investors and creditors. So spending more funds to reveal further information can be avoided. Therefore, big companies do not always have lower information production cost compared to small companies since not all big companies have a stable financial condition. From the indirect result this study finds that agency cost can moderate company size to company performance. However, company size does not solely show significant effect on company performance. This is because the agency cost is the control from management side, the supervision functions and control in using discretionary expense against net sales will lead to the improvement of company per- formance. JURNAL AKUNTANSI, MANAJEMEN DAN EKONOMI, VOL 21, N0 3, 2019, 54-60 The Effect of Agency Cost on Company Per- formance Agency relationship is a contract in which involve one person or more as investor(s) (that is called principal) and another person (that is called agent) to take action on behalf of the principal and upon whom is given the authority to make decisions (Jensen & Meck- ling, 1976). In a company, there are several functions, such as the organization function and the ownership function. Jensen and Meckling (1976) argue that the separation of organization function and the ownership func- tion is highly vulnerable to agency conflict. Agency cost in this research applies the ratio proxy of discretionary expense against net sales. Discretionary expense is the ex- pense that are based on the discretionary of a manager. Interest expense is one of the components of discretionary expense that can reduce tax; tax reduction can improve company performance. While the company performance is measured using net profit against equity. When the agency cost de- creases, the company profit increases, and the company performance also improves. When the agency cost decreases, there is tendency that company performance de- creases. The ignorance of agency cost can cause a reduction in competitive profit which leads to lessening company performance. The result of this research indicates that agency cost has a significant effect on com- pany performance. The descriptive statistical analysis evidences that the agency cost of the average company is larger than company performance. This value can increase com- pany performance. Therefore, the research result is in line with the finding of Lin (2006) claiming that agency cost is the rates as the responsibility of shareholders so that man- agement can efficiently organize company to raise its value or to increase shareholders wealth. The research result is in accordance with Kim and Lee (2003) who find the closed relations between agency problem and com- pany performance. This means that company burden affects company performance. The research result is in line with Wright et al. (2009) who finds that agency cost has nega- tive significant effect on company perfor- mance. In other words, if the agency cost is left to grow uncontrollably, it will reduce the achievement of competitive profit which has negative effect on performance. CONCLUSIONS The coefficient value of the capital struc- ture variable path is 0.093, so the coefficient value indicates the amount of capital struc- ture contribution that directly influences agency cost. The effect is statistically signifi- cant negative, since t_count (1.084) 0.05. As the result, the hypothesis (H1) stating there is an effect of capital struc- ture (X1) on agency cost (Y1) is rejected. The path coefficient value of the company size variable is -0,596, the coefficient value indicates the size of the contribution of com- pany size which directly influences agency cost. The effect is statistically insignificant, because t_count (-6.966)> t_tabel (1.9995) is supported by the value of sig t (0,000) <0.05. Thus, the hypothesis (H2) which states that there is an influence of company size (X2) on the agency cost (Y1) is accepted. The coefficient value of the capital struc- ture variable path is -0.120; the coefficient value indicates the amount of capital struc- ture contribution that directly influences the company's performance. The effect is statisti- cally insignificant, because t_count (-1.571) 0.05. Therefore, the hypothesis (H3) which states that there is an influence of capital structure (X1) on performance com- pany (Y2) is rejected. The coefficient value of the company size variable path is 0.142; the coefficient value indicates the size of the contribution of the company size which directly influences the company's performance. The effect is statisti- cally insignificant, because t_count (1.508) 0.05, so the hypothesis (H4) indicating that there is an influence of com- pany size (X2) on company performance (Y2) is rejected. The path coefficient value of the agency cost variable is -0.593; the coefficient value indicates the amount of agency cost contribu- tion that directly influences company perfor- mance. The effect is statistically significant negative, because t_count (-6.251)> t_table (1.9995) is supported by the value of sig t (0,000) <0.05, so the hypothesis (H5) that there is an influence of agency cost (Y1) on performance company (Y2) is accepted. From the descriptions above, this study concluded that H2 and H5 are accepted while H1, H3, H4 are rejected. The Table 5.14 is a summary of the hypothesis and the coeffi- cient of influence between exogenous varia- JURNAL AKUNTANSI, MANAJEMEN DAN EKONOMI, VOL 21, N0 3, 2019, 54-60 bles and endogenous variables. From this study, the authors provide several sugges- tions to interested parties. It is important for both the stock exchange and institutions in relation to ensure man- agement of capital market and companies continuing good corporate governance. The open access of information about the compa- ny is very essential to establish investors’ trust so they intend to invest in the capital market. Information about fundamental condition of companies as the object of investment is essential for investors and potential investors in using a technical approach. By under- standing company's fundamental conditions, the investors and potential investors can find real condition of the company through its fi- nancial statements. Profitability has been an important reference for investors to determine the company's performance. However, the investors also need to know how the compa- ny manages its assets productively through its liquidity. Therefore, it is important for in- vestors and potential investors to have basic financial management knowledge, particularly financial ratios, to help them analyzing com- pany performance through financial state- ments. Companies should have large resources in making wider disclosure of information and in financing the provision of information for internal purposes. The information can be appropriate materials to disclose information to external parties, such as: investors and creditors. Thus, so the company does not require higher additional cost to make wider disclosure. Further researchers can examine the ef- fect of capital structure on agency costs with- in companies experiencing financial distress. Therefore, the empirical evidence may show increasing debt that reduce clearer agency costs. Future studies can also apply path analysis techniques to analyse non-linear relationships as explained by Hayes and Preacher (2010) to find out deeper infor- mation on the obtained research data to get better test results if the data indicates a rela- tional non-linear data. The results of this study provide several implications that occur in this study. Practi- cally, the manufacturing companies in the consumer goods industry sector in Indonesia have been indicated having agency problems in accordance with the observed samples. The increasing debt cannot reduce agency costs. A high capital structure is less attrac- tive to managers since it imposes a higher risk for managers rather than for public inves- tors. This opinion is supported by Lin's re- search (2006) assuming that managers also acts as the owner of the company. When a company goes bankrupt due to the defaulted debt, the manager also bears the costs of bankruptcy. Practically, the company size affects the agency cost. Conflicts between shareholders and managers can linfluence agency costs. In minimizing the occurrence of agency costs, the managers maximize the usage of compa- ny assets in carrying out company operations so that the company pays interest expenses and will reduce corporate taxes. This will im- prove company performance and can auto- matically maximize company profits. The use of debt cannot increase the bur- den and does not significantly improve com- pany performance. The managers should consider the trade off between interest ex- pense and tax savings. Thus, the managers employ debt as an alternative capital to re- duce interest costs and taxes that can in- crease company value. Large companies may not necessarily produce better perfor- mance. The large companies do not neces- sarily produce better performance even though large companies can save their dis- creationary expenses. Therefore, the inves- tors and prospective investors do not concern on the size of company for investment. The theory of Brigham and Weston (1994) state that a large and established company is eas- ier to go to the capital market. In turn, this addresses greater flexibility and gains inves- tors’ broader trust. It can be concluded that companies with large assets are not able to make greater profit if they are not followed by the result of good operational activity. Agency cost is practically a significant ef- fect on the company's performance. In other words, the company's burdens affect the company's performance. The interest ex- penses affect performance of the company. In the manufacturing company of the con- sumer goods sector, it is known that compa- ny size and agency cost affect the company's performance. This indicates that the company with a large scale will influence a slight bur- den of the company (discreationary expense) so that the ROE of a company's performance will be high. Agency cost is also a benchmark for the company's performance to increase the company's profit. Furthermore, the inves- tor will tend to invest into a company that have maximum profit as the investor's stock. JURNAL AKUNTANSI, MANAJEMEN DAN EKONOMI, VOL 21, N0 3, 2019, 54-60 There are some limitations that are appar- ent from this research. Some actions cannot be conducted due to some reasons that af- fect imperfections of research results. Some reasons addressing the low value coefficient of total model of research may refer to the interference linearity assumptions in the analysis of pathways. The assumption requir- ing relationships between existing variables need to be linear. Otherwise, nonlinear shapes may give better pictures about the data characteristics. Based on current devel- opment of statistical sciences, the analysis of pathways can be conducted in the form of nonlinear functions, instead of linear in its parameters (Hayes and Preacher, 2010). However, this study decides using the as- sumption of linearity. This research only investigates the com- panies sector of consumer goods industry. In particular, the company produces food and beverages, medical and health products, and household needs. Therefore, the results of this study may not be widely generalized due to differences in the characteristics of re- search objects out of consumer goods indus- tries. REFERENCES Al Aiin, S., Carre, A., Hauwel, C. F., Baudouin, J.- Y., & Richard, C. B. (2013). What is the Emotional Core of the Multidimensional Machiavellian Personality Trait? 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