Board Reforms and the Cost of Equity: International Evidence
45 Pages Posted: 5 Aug 2020
Date Written: May 8, 2020
We examine the impact of corporate board reforms on the COE using a sample of data in 41 countries for the period from 1992 to 2012. We find a significant increase in the COE after board reforms worldwide. This effect is eased for firms in countries under a comply-or-explain reform approach, as well as for firms in emerging countries. We further conclude that board reforms involving board independence, audit committee and auditor independence, and the separation of the CEO and Chairman positions, result increases in the COE. Our results suggest that board reforms are considered inefficient to mitigate agency problems.
Keywords: Board Reforms; Cost of Equity; Corporate Governance; Cross-Country Study
JEL Classification: G14; G32; K151
Suggested Citation: Suggested Citation