THE IMPACT OF PROTECTIVE PROVISIONS IN INDUSTRIAL PREFERRED STOCKS ON THE COST OF CAPITAL AND ON THE CUT-OFF POINT OF CAPITAL BUDGETING PROJECTS

1978 ◽  
Vol 13 (3) ◽  
pp. 28-29
Author(s):  
Joseph F. Bradley ◽  
Joseph P. Giusti
Keyword(s):  
Cost Of Capital ◽  
Capital Budgeting ◽  
The Cost ◽  
The Impact

Does environmental information disclosure affect the performance of energy-intensive firms’ borrowing ability? Evidence from China

2018 ◽  
Vol 29 (5) ◽  
pp. 685-705 ◽  
Author(s):  
Haiqing Hu ◽  
Chun-Ping Chang ◽  
Minyi Dong ◽  
Wei-Na Meng ◽  
Yu Hao
Keyword(s):  
Capital Market ◽  
Information Disclosure ◽  
Cost Of Capital ◽  
Environmental Information ◽  
Influential Factors ◽  
Environmental Information Disclosure ◽  
Loan Size ◽  
The Cost ◽  
The Impact ◽  
Positive Effect

In recent years, a growing strand of China’s listed companies chose to disclose environmental information, which may potentially affect their financial performance then further influence its performance of financial supports. To quantitatively investigate the impact of enterprise’s environmental information disclosure on the ability of firms’ borrowing in China, this paper divides the measurements of information disclosure into five categories and evaluates firms’ performance in capital market through its availability of a loan and the cost of capital. In total, 97 listed energy-intensive companies in China are selected and their data covering the period of 2000–2014 are utilized for empirical study. The empirical results indicate that enterprise’s environmental information disclosure appears to have a significantly positive effect on the loan size available, while the cost of capital is less sensitive to environmental information disclosure. The empirical evidence also suggests that, among the five aspects of information disclosure measurements, the future plan and monetary information are the most influential factors of the cost of capital.

The Impact of Price Regulation on the Cost of Capital

2013 ◽  
Vol 84 (2) ◽  
pp. 139-158 ◽  
Author(s):  
Fernando T. Camacho ◽  
Flavio M. Menezes
Keyword(s):  
Cost Of Capital ◽  
Price Regulation ◽  
The Cost ◽  
The Impact

Information risk, cost of equity and stock returns: evidence from Iranian firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ahmad Abdollahi ◽  
Mehdi Safari Gerayli ◽  
Yasser Rezaei Pitenoei ◽  
Davood Hassanpour ◽  
Fatemeh Riahi
Keyword(s):  
Stock Returns ◽  
Capital Market ◽  
Cost Of Capital ◽  
Positive Impact ◽  
Stock Exchange ◽  
Cost Of Equity ◽  
Content Type ◽  
Information Risk ◽  
The Cost ◽  
The Impact

Purpose A long history of literature has considered the role of information risk in determining the cost of equity. The question that has remained unanswered is whether information risk plays any systematic role in determining the cost of equity. One of the fundamental decisions that every business needs to make is to assess where to invest its funds and to re-evaluate, at regular intervals, the quality of its existing investments. The cost of capital is the most important yardstick to evaluate such decisions. Greater information is associated with the lower cost of capital via mitigating transaction costs and/or reducing estimation risk and stock returns. This study aims to investigate the impact of information risk on the cost of equity and corporate stock returns. Design/methodology/approach The research sample consists of 960 firm-year observations for companies listed on the Tehran Stock Exchange from 2009 to 2018. The research hypotheses were tested using multivariate regression models based on panel data. Findings The results reveal that information risk has a significant positive impact on the firm’s cost of equity. However, the impact of information risk on stock returns is not statistically significant. Originality/value To the best of the knowledge, the current study is almost the first of its kind in the Iranian literature which investigates the subject matter; therefore, the findings of the study not only extend the extant theoretical literature concerning the information risk in developing countries including the emerging capital market of Iran but also help investors, capital market regulators and accounting standard setters to make timely decisions.

Accounting for Software Development Costs and Information Asymmetry

2005 ◽  
Vol 80 (4) ◽  
pp. 1211-1231 ◽  
Author(s):  
Emad Mohd
Keyword(s):  
Software Development ◽  
Information Asymmetry ◽  
Cost Of Capital ◽  
Software Industry ◽  
High Tech ◽  
Bid Ask Spread ◽  
Development Costs ◽  
Software Firms ◽  
The Cost ◽  
The Impact

I investigate the impact of implementing SFAS No. 86, which provides an exception to the GAAP requirement of the immediate expensing of research and development (R&D), on information asymmetry. Using bid-ask spread and share turnover as proxies for information asymmetry, I find that after the introduction of SFAS No. 86, information asymmetry decreases for software firms relative to that of other high-tech firms. Within the software industry, I find that information asymmetry is significantly lower for firms that capitalize (capitalizers) than for those who expense (expensers) software development costs. Thus, accounting for software development costs per SFAS No. 86 reduces information asymmetry and, consequently, the cost of capital. As well, investors' uncertainty about the future benefits of software development costs is reduced when firms capitalize these costs.

scholarly journals The impact of corporate governance on the cost of equity

2019 ◽  
Vol 4 (2) ◽  
pp. 293-314
Author(s):  
Syed Tauseef Ali ◽  
Zhen Yang ◽  
Zahid Sarwar ◽  
Farman Ali
Keyword(s):  
Corporate Governance ◽  
Agency Problem ◽  
Capital Budgeting ◽  
Coefficient Of Determination ◽  
Cost Of Equity ◽  
High Demand ◽  
Content Type ◽  
Wide Range ◽  
The Cost ◽  
The Impact

Purpose In view of organizational inertia, with the occurrence of a major event, though resource rigidity minimizes, however simultaneously, it increases process rigidity, which creates difficulties in motivating managers and dealing with the agency problem. Therefore, keeping in mind the high demand created by the China–Pakistan Economic Corridor and Naya Pakistan Housing Scheme in the cement sector of Pakistan, the purpose of this paper is to investigate the impact of corporate governance (CG) on the cost of equity (COE) in the cement sector, to deal with the problems surging during and after the completion of these projects and highlight further opportunities for the cement sector of Pakistan. Design/methodology/approach CG is a qualitative concept therefore, eight proxies have been used to measure it along with the two control variables. This study uses balance panel data of six years from 2012 to 2017, collected from 18 companies of the cement sector of Pakistan. Descriptive statistics have been used to describe the data, correlation matrix to see the nature of the relationship, and Pooled OLS as the estimation technique, while to analyze the data a statistical package 13 has been used. To measure the COE, the Capital Asset Pricing Model (CAPM) has been used. Findings Regression results suggest that block ownership, insider ownership and the board size are insignificant, while CEO tenure is negatively and significantly associated with the COE. Non-executive directors, independence and CEO duality are insignificant; however, diversity is positively and significantly associated with the COE. Moreover, the mean value of the COE is 8.22 percent for the cement sector, while the coefficient of determination of the model under study is 74 percent. Research limitations/implications This paper is based on the data from the cement sector of Pakistan only. Therefore, this is the reason that these results cannot be generalized on the whole economy of Pakistan. Practical implications This study helps in finding out the COE value specific to the cement sector, which will help this sector to evaluate the capital budgeting decision more precisely and accurately than before. Moreover, the association of diversity as positive, while independence as negative with the COE highlights a room for improvement in the implementation of CG codes by SECP. This study also helps to mitigate the impact of inertia, the after-effects of high demand, and managing the agency problem in the cement sector. Originality/value This is the first study using CG data collected just after the revised promulgation of CG codes in 2012, along with a wide range of eight proxies measuring CG and its impact on the COE in the cement sector.

Corporate finance practices in Morocco

2017 ◽  
Vol 43 (8) ◽  
pp. 865-880 ◽  
Author(s):  
H. Kent Baker ◽  
Imad Jabbouri ◽  
Chaimae Dyaz
Keyword(s):  
Corporate Finance ◽  
Response Bias ◽  
Cost Of Capital ◽  
Capital Budgeting ◽  
Listed Companies ◽  
Rate Of Return ◽  
Allocation Of Resources ◽  
Content Type ◽  
Corporate Managers ◽  
The Cost

Purpose The purpose of this paper is to examine corporate finance practices in the frontier market of Morocco and compare the practices used by Moroccan companies to those in other countries. It focuses primarily on capital budgeting and real options. The study also examines whether corporate finance practices used in Morocco are consistent with more theoretically superior techniques. Design/methodology/approach The study uses a mail questionnaire to gather data from chief financial officers and other senior executives of Casablanca Stock Exchange (CSE) listed companies. Findings Moroccan managers generally view the internal rate of return, accounting rate of return, and payback method as more important than the theoretically superior net present value. Few of the responding firms use real options when making capital budgeting decisions. They tend to use less sophisticated techniques to evaluate investment opportunities and calculate the cost of capital than their counterparts in developed countries. The most frequently used techniques by CSE-listed companies to estimate the cost of equity capital are the cost of debt plus an equity risk premium and the accounting return on equity. CSE-listed companies rely heavily on management’s subjective judgment to estimate cash flows. Research limitations/implications Despite a 40 percent response rate, the number of responses did not permit examining whether differences in firm size, industry, educational background, and other characteristics affect the results. Although non-response bias is a potential limitation, test results show no statistically significant differences between the responding and non-responding companies on any of the five characteristics analyzed. These findings lessen concern about potential non-response bias. Given that the findings relate to a frontier market, they are most likely generalizable to similar countries in the Middle East and North Africa region. Practical implications The findings may be useful to various parties including corporate managers, boards of directors, and financial analysts. Given that investment decisions affect shareholder wealth, understanding the practices used by corporate managers is crucial in deciding what projects to undertake. This research raises awareness for management to review their corporate finance practices, compare them with their peers, and examine whether these techniques are aligned with proper allocation of resources and value maximization. Social implications Overall, the findings imply that Moroccan firms have room to improve their corporate finance practices. Failing to do so could have serious implications ranging from the inefficient allocation of resources in the economy to the destruction of shareholder value. Originality/value To the authors’ knowledge, this is the most comprehensive study using survey methodology to investigate corporate finance practices in Morocco. It provides new insights on such topics as capital budgeting, capital structure, cost of capital estimation, and real option techniques.

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