Article2014

Corporate Governance and the Cost of Capital: An International Study

105 citations0/0 files storedInternational Review of Finance

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Corporate Finance and Governance Auditing, Earnings Management, Governance Corporate Governance and Financial Management

Abstract

Abstract This study shows that firms with good corporate governance are consistently associated with both lower cost of equity and cost of debt capital in an international setting. The association between corporate governance and the cost of equity is more pronounced in countries with strong legal systems, extensive disclosure practices, and good government quality. However, the relation between corporate governance and the cost of debt is stronger in countries characterized by weak legal protection, low transparency, and poor government quality. The differential relations can be attributed to asymmetric payoffs received by creditors and shareholders.

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References

1984Corporate financing and investment decisions when firms have information that investors do not have 1998Law and Finance 1992The Cross-Section of Expected Stock Returns 1997A Survey of Corporate Governance 2003Corporate Governance and Equity Prices 1999The quality of government 2003Earnings management and investor protection: an international comparison 2008The law and economics of self-dealing

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