Stock Market Integration, Cost of Equity Capital, and Corporate Investment: Evidence from Brazil

26 Pages Posted: 30 Jan 2019

See all articles by David Hillier

David Hillier

University of Strathclyde - Department of Accounting and Finance

Tiago Loncan

University of Strathclyde, Department of Accounting and Finance, Students

Date Written: January 2019

Abstract

We study the effect of stock market integration on the cost of capital and investment, using Brazil as a case study. We show that integration, as proxied by foreign ownership, has a positive impact on the financing side by reducing cost of capital. On the output side, we find that integration increases corporate investment, but only for well‐governed firms. We contribute to the debate on the pros and cons of financial globalization, particularly by providing evidence of important linkages between financial integration and real economic activity.

Keywords: cost of capital, international asset pricing, investment, stock market integration

Suggested Citation

Hillier, David and Loncan, Tiago, Stock Market Integration, Cost of Equity Capital, and Corporate Investment: Evidence from Brazil (January 2019). European Financial Management, Vol. 25, Issue 1, pp. 181-206, 2019. Available at SSRN: https://ssrn.com/abstract=3326049 or http://dx.doi.org/10.1111/eufm.12147

David Hillier (Contact Author)

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 330 4809 (Phone)
44 0141 330 4442 (Fax)

Tiago Loncan

University of Strathclyde, Department of Accounting and Finance, Students ( email )

Glasgow
United Kingdom

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