Corporate governance, financing patterns and the cost of capital: evidence from New Zealand companies

Purpose This paper aims to investigate the extent to which corporate governance (CG) systems adopted by Latin American listed firms affect their cost of equity capital. Several studies on the link between the two aforementioned dimensions have been carried out, but none in the context of Latin American firms. Design/methodology/approach A CG index is created by taking into account the peculiarities of each country and the recommendations given by the corresponding CG institutes. In particular, to assess the level of CG quality, three sub-indexes have been identified: “Disclosure”, “Board of Directors” and “Shareholder Rights, Ownership and Control Structure”. Findings The results indicate a negative relationship between CG quality and the cost of equity. In particular, the “Disclosure” component is the one mostly affecting the cost of equity. Research limitations/implications This study contributes to the literature by adding knowledge on the relationship between CG and cost of capital considering, for the first time, the overall Latin American market. Practical implications The paper proves that institutional investors all over the world are disposed to pay a premium to invest in firms with effective CG standards; moreover, this premium is higher in emerging countries such as those analyzed in this paper, rather than in developed countries. Originality/value To the authors' knowledge, this is the first paper empirically investigating the relationship between CG and cost of capital in Latin America.

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Biaya Modal Perusahaan di Indonesia: Tanggung Jawab Sosial dan Tata Kelola Perusahaan

Jurnal Ekonomi ◽

10.24912/je.v26i3.796 ◽

2021 ◽

Vol 26 (3) ◽

pp. 361

Author(s):

A. Firmansyah, A. F. Andriyani, M. L. Mahrus, W. Febrian, P. H. Jadi

Keyword(s):

Corporate Governance ◽

Corporate Social Responsibility ◽

Social Responsibility ◽

Cost Of Capital ◽

Stock Exchange ◽

Hypothesis Test ◽

Linear Regression Analysis ◽

Annual Reports ◽

Corporate Social ◽

The Cost

The high capital cost indicates the company's risk to obtain funding from debt and equity. The test in this study aims to prove the association between corporate social responsibility and corporate governance with the cost of capital. This study employs data sourced from financial reports and annual reports of the listed companies on the Indonesia Stock Exchange, downloaded from www.idx.co.id. In addition, this research data also employs stock price information sourced from finance.yahoo.com. The sample selection in this study used purposive sampling with a total sample of 260 observations from 65 companies from 2016 to 2019. The hypothesis test in this study used multiple linear regression analysis for panel data. This study concludes that corporate governance is positively associated with the cost of capital, while corporate social responsibility is negatively associated with the cost of capital. This study suggests that Indonesia's capital market supervisory authority needs to improve its governance policies and governance oversight mechanisms for companies listed on the Indonesia Stock Exchange.

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Employee stock ownership and the cost of capital 1 1We are grateful to the Editor in Chief, Thomas Lagoarde-Segot and to participants at 2016 French accounting association conference, 2015 French finance association conference, the 2014 International corporate governance for their useful comments and suggestions. Siessima Djibril Toé provided excellent research assistance. All remaining errors are our own.

Research in International Business and Finance ◽

10.1016/j.ribaf.2017.04.007 ◽

2017 ◽

Vol 41 ◽

pp. 67-78 ◽

Cited By ~ 2

Author(s):

Nicolas Aubert ◽

Alexander Kern ◽

Xavier Hollandts

Keyword(s):

Corporate Governance ◽

Cost Of Capital ◽

Stock Ownership ◽

Employee Stock Ownership ◽

Excellent Research ◽

International Corporate Governance ◽

The Cost

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Institutional investors and cost of capital: The moderating effect of ownership structure

PLoS ONE ◽

10.1371/journal.pone.0249963 ◽

2021 ◽

Vol 16 (4) ◽

pp. e0249963

Author(s):

Xiaoping Huo ◽

Hongying Lin ◽

Yanan Meng ◽

Peter Woods

Keyword(s):

Corporate Governance ◽

Ownership Structure ◽

Capital Market ◽

Institutional Investors ◽

Cost Of Capital ◽

Listed Companies ◽

Moderating Effect ◽

Theory And Practice ◽

The Cost ◽

The Relationship

Guiding institutional investors to actively participate in corporate governance is a hot issue to improve the internal governance of China’s listed companies. This study seeks to provide a comprehensive understanding of the mechanism that underlies the governance effects of the heterogeneity of institutional investors on the cost of capital, and the influence of ownership structure on the relationship between them. Using an unbalanced panel data on A-share listed companies of Shanghai and Shenzhen in China’s capital market during the 2014–2019 period, this study reveals how institutional investors with longer holding period and higher shareholding ratio are negatively associated with the cost of capital in China’s capital market. Furthermore, this study successfully confirms the moderating effect of ownership structure in the relationship between institutional investors and the cost of capital. China’s state-owned enterprises are more likely to introduce improvements at the corporate governance level, and ownership concentration weakens the negative influence of institutional investors on the cost of capital. The research contributes to a deeper understanding of the impacts of institutional investor’s heterogeneity and ownership structure on the cost of capital in China. In the process, the study yields useful implications for the theory and practice of corporate governance.

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Multiple corporate governance attributes and the cost of capital – Evidence from Germany

The British Accounting Review ◽

10.1016/j.bar.2014.02.003 ◽

2014 ◽

Vol 46 (2) ◽

pp. 179-197 ◽

Cited By ~ 29

Author(s):

Duc Hung Tran

Keyword(s):

Corporate Governance ◽

Cost Of Capital ◽

The Cost

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Impact of Corporate Governance on the Cost of Capital: Empirical Evidence from the Non-Financial Sector of Pakistan

Journal of Accounting and Finance in Emerging Economies ◽

10.26710/jafee.v7i2.1789 ◽

2021 ◽

Vol 7 (2) ◽

pp. 477-489

Author(s):

Muhammad Bilal Ijaz ◽

Muhammad Naveed ◽

Hassan Raza

Keyword(s):

Economic Growth ◽

Corporate Governance ◽

Cost Of Capital ◽

Financial Sector ◽

Political Connections ◽

Board Independence ◽

Data Set ◽

Ceo Duality ◽

Board Committees ◽

The Cost

Purpose: The study looked at the effect of corporate governance on the cost of capital of firms in Pakistan's non-financial sector. Design/Methodology/Approach: The study sample is comprised of balanced data set of 175 non-financial companies listed on the Pakistan Stock Exchange between 2008 and 2018. The study used the dynamic panel GMM estimator technique. Findings: The findings revealed that an increase in the number of directors, board independence, CEO duality, and inflation negatively influence the cost of capital. On the other hand, the increase in institutional holdings increased the cost of capital. In addition, it is discovered that board committees, political connections, and economic growth do not affect the cost of capital Implications/Originality/Value: When board size, CEO duality, board independence, and inflation increased, the cost of capital decreased in Pakistan's non-financial sector. Furthermore, board committees, political connections, company leverage, and economic growth do not affect the cost of capital in Pakistan's non-financial sector. In comparison, an increase in institutional shareholding increased the cost of capital in Pakistan's non-financial sector.

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