Information, Investment Adjustment, and the Cost of Capital

2018 ◽  
Vol 53 (4) ◽  
pp. 1715-1754 ◽  
Author(s):  
Lixin Huang ◽  
Qiang Kang
Keyword(s):  
Private Information ◽  
Stock Prices ◽  
Cost Of Capital ◽  
Growth Firms ◽  
High Flexibility ◽  
The Cost

Private information imposes a severe trading disadvantage on uninformed traders while at the same time providing firms with valuable signals for investment adjustment. The two forces have opposite impacts on the cost of capital, and the net effect depends on which force dominates. We show that stocks of firms with low flexibility in investment adjustment (“value firms”) command an information premium, whereas stocks of firms with high flexibility in investment adjustment (“growth firms”) deliver an information discount. These results are consistent with the findings that growth firms exhibit stronger investment sensitivity to information in stock prices than value firms.

Institutional Investors, Private Information, and the Cost of Capital

2011 ◽  
Author(s):  
Huong Giang (Lily) Nguyen ◽  
Xiangkang Yin ◽  
Luong Hoang Luong
Keyword(s):  
Private Information ◽  
Institutional Investors ◽  
Cost Of Capital ◽  
The Cost

scholarly journals Cost of Capital Estimation for Highway Concessionaires in Chile

2018 ◽  
Vol 2018 ◽  
pp. 1-9 ◽  
Author(s):  
Cristian Vergara-Novoa ◽  
Juan Pedro Sepúlveda-Rojas ◽  
Miguel D. Alfaro ◽  
Nicolás Riveros
Keyword(s):  
Capital Structure ◽  
Stock Prices ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Cost Of Debt ◽  
Capital Asset Pricing ◽  
Cost Of Equity ◽  
Asset Pricing Model ◽  
The Cost ◽  
The Capital Structure

In this paper, we present the cost of capital estimation for highway concessionaires in Chile. We estimated the cost of equity and the cost of debt and determined the capital structure for each one of twenty-four concessionaires that operate highways. We based our estimations on the developments of Sharpe (1964), Modigliani and Miller (1958), and Maquieira (2009), which were also compared with the Brusov et al. (2015) developments. We collected stock prices for different highway concessionaires around the world from Google Finance and Reuters’ websites in order to determine the Beta of equity using a representative company. After that, we estimated the cost of equity considering Hamada (1969) and a Capital Asset Pricing Model. Then, we estimated the cost of capital using the cost of debt and the capital structure of Chile’s highway concessionaires. With all above, we were able to determine the Weighted Average Cost of Capital (WACC) for highway concessions which ranges from 5.49 to 6.62%.

scholarly journals Does the Cost of Capital Affect Environmental Performance?

2019 ◽  
Vol 3 (1) ◽  
pp. 14
Author(s):  
Haninun Haninun ◽  
Lindrianasari Lindrianasari ◽  
Susi Sarumpaet ◽  
Agrianti Komalasari
Keyword(s):  
Stock Prices ◽  
Environmental Performance ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
Observation Data ◽  
Financial Reports ◽  
The Cost ◽  
Relationship Of ◽  
The Relationship

This study aims to test the influence of environmental performance in Indonesia associated with the cost of capital. This research is motivated by previous findings which stated that the environmental performance received a good response from investors as reflected in increased stock prices (Ba et al., 2013; Middleton, 2015). The development hypothesis of the research is based on the theory of stakeholder, legitimacy and the theory of signal and some previous research such as the studies that have been done (Guenster et al., 2011; Sarumpaet et al., 2017). This type of research is research explanatory, the determination of the sample using the method of purposive sampling with number of samples to qualify as many as 215 observation data derived from the annual financial reports of companies listed on the stock exchange in 2015 until 2017. The results of the statistical analysis show that there are significant negative not significant on the relationship of environmental performance with cost of capital, it can be explained that only a small fraction of investors understand the performance information of the environment, and make it as a basis for making the decision to invest.

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