Substantial literature attempts to estimate the potential and magnitude of agency costs including an agency cost function that characterizes the impact of dividend policies and insider ownership on firm debt. These approaches are problematic because they assume all firms can be aggregated, even whenthey have different approaches to resolving agency costs. Agency cost estimates tend to average out the results across firms or rely on non-linearities to identify disparate incentives leading to mixed results. This paper develops an empirical agency cost model that can account for firms which do not offer dividends or have limited insider ownership. Assuming that such discrete decisions are intentional, we model agency cost decisions within an incidental truncation framework to publicly traded Chinese manufacturing firms and find the convergence of interests theory holds when firms do not offer dividends or allow insider ownership, and entrenchment theory holds when firms pay dividends and/or allow insider ownership.