Financial Development, Corporate Governance and Cost of Equity Capital

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

Kartick Gupta

University of South Australia

Chandrasekhar Krishnamurti

Auckland University of Technology

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

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

Kartick Gupta (Contact Author)

University of South Australia ( email )

37-44 North Terrace, City West Campus
Adelaide, South Australia 5001
Australia
+61 8 830 27179 (Phone)

HOME PAGE: http://people.unisa.edu.au/Kartick.Gupta

Chandrasekhar Krishnamurti

Auckland University of Technology ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

Alireza Tourani-Rad

Auckland University of Technology - Faculty of Business & Law ( email )

3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand

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