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Cost of equity capital, control divergence, and institutions: the international evidence
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  • 作者：Teresa Chu ; In-Mu Haw ; Bryan Byung-Hee Lee…
  • 关键词：Corporate governance ; Ownership ; control divergence ; Cost of equity capital ; Legal institutions ; Extra ; legal institutions ; G15 ; G30 ; G38 ; K22
  • 刊名：Review of Quantitative Finance and Accounting
  • 出版年：2014
  • 出版时间：October 2014
  • 年：2014
  • 卷：43
  • 期：3
  • 页码：483-527
  • 全文大小：452 KB
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  • 作者单位：Teresa Chu (1)
    In-Mu Haw (2)
    Bryan Byung-Hee Lee (1)
    Woody Wu (3)

    1. Department of Accounting and Information Management, Faculty of Business Administration, University of Macau, Av. Padre Tomás Pereira, Taipa, Macau
    2. Department of Accounting, M.J. Neeley School of Business, Texas Christian University, Fort Worth, TX, 76129, USA
    3. Faculty of Business Administration, School of Accountancy, The Chinese University of Hong Kong, Shatin, Hong Kong
  • ISSN：1573-7179
文摘
This study investigates the governance role of a country’s legal and extra-legal institutions in explaining the variations in firms-cost of equity capital induced by concentrated ownership structures from 21 countries. Using four implied cost of equity proxies, the results show that the large ownership-control divergence of the ultimate owner has a positive and significant impact on the firm’s cost of equity capital. The finding lends support to the entrenchment effect in that the concentrated ownership structure increases the firm’s external financing cost. Further analyses demonstrate that the higher equity cost induced by the ultimate ownership structure is significantly reduced by a country’s stronger legal and extra-legal institutions, highlighting the governance role played by a country’s institutions in reducing the firm’s external financing cost.

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