Financial Development, Corporate Governance and Cost of Equity Capital

Gupta, Kartick; Krishnamurti, Chandrasekhar; Tourani-Rad, Alireza

doi:10.2139/ssrn.1522913

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Financial Development, Corporate Governance and Cost of Equity Capital

Finance and Corporate Governance Conference 2010 Paper

42 Pages Posted: 14 Dec 2009 Last revised: 24 Mar 2011

See all articles by Kartick Gupta

Alireza Tourani-Rad

Auckland University of Technology - Faculty of Business & Law

Date Written: March 1, 2011

Abstract

This paper explicitly examines the interactive impact of country level legal and financial development, and firm level governance attributes on the cost of equity capital. Using a comprehensive sample of 7380 firm years drawn from 22 developed countries, we show that firm level governance attributes affect the cost of equity capital only in the Common Law countries with high level 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.

Keywords: Corporate Governance, Financial Development, Legal Origin, Implied Cost of Equity Capital

JEL Classification: G15, G34, F30

Suggested Citation: Suggested Citation

Gupta, Kartick and Krishnamurti, Chandrasekhar and Tourani-Rad, Alireza, Financial Development, Corporate Governance and Cost of Equity Capital (March 1, 2011). Finance and Corporate Governance Conference 2010 Paper, Available at SSRN: https://ssrn.com/abstract=1522913 or http://dx.doi.org/10.2139/ssrn.1522913