دانلود رایگان مقاله انگلیسی توسعه مالی، مدیریت شرکت ها و هزینه سرمایه سهام - الزویر 2017

Abstract

Existing research suggests that external governance is more relevant than internal governance in affecting a firm’s value. We contribute to the literature by explicitly examining the interactive role played by country-level financial development and legal institutions in influencing the impact of firm-level governance on the cost of equity capital. Using a comprehensive sample of 7,380 firm years drawn from 22 developed countries, we show that firm-level corporate governance attributes affect the cost of equity capital primarily in the Common Law countries with high levels of financial development. Our study is the first to highlight the complementary effects of legal origin, financial development and firm-level governance attributes in influencing the cost of equity capital.

5. Conclusions

A strand of research documents that firm-level corporate governance attributes are associated with the cost of equity capital. Another strand of research provides evidence regarding the beneficial impact of superior legal institutions and regulations on the cost of capital. Our study jointly examines the effects of country-level financial development and firm-level governance attributes on the cost of equity capital. We provide evidence that firm-level governance attributes affect the cost of equity capital only in Common Law countries with high levels of financial development. As such, our study highlights the complementary effects of legal origin, financial development and firm-level governance attributes in influencing cost of equity capital.

Our study, based on developed markets, suggests that there is complementarity between firmlevel corporate governance and country-level financial development in terms of their impact on a firm’s cost of equity capital. This result is at variance with the prior work of Chen et al. (2009) who studied emerging markets. In spite of our best efforts, due to data availability and other issues, we could not replicate their results with recent emerging markets data. We leave this for future research. Further, we have tried several alternative ways to re-estimate our results to mitigate potential concerns of endogeneity. However, we acknowledge that in spite of our best efforts, there may be unresolved concerns of endogeneity. We recognise these as limitations of the current study.