Financial Development and the Cost of Equity Capital
认领作者 认领管理权限
发布日期:2014年01月14日 上次修订日期:2022年03月09日


This study examines relation between financial development and the cost of equity capital and finds the following main results: (1) stock market development in general reduces cost of equity, consistent with its role in liquidity provision, information asymmetry reduction, and risk diversification helping to reduce systemic risk; (2) banking development only weakly decreases the cost of equity, consistent with the pervasive state-ownership in large banks constraining their efficiency. Further analysis reveals that the relation between stock market development and cost of equity is more pronounced in large firms and in firms with lower growth potentials, suggesting that stock market development fails to support small and/or growth firms. Moreover, the relation is more pronounced in region with low accounting quality, weak law enforcement, or lower market integration, and in period prior to split share structure reform. The evidence suggests that stock market developments and other institutional arrangements substitute each other in reducing cost of equity. This study contributes to literatures on financial development and cost of equity, and also holds immediate policy implications.


  • 浏览次数:

  • 下载次数:



Jeong Bon Kim ; Mary L. Z. Ma ; Financial Development and the Cost of Equity Capital (2014年01月14日)

*邮 箱