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Board reforms and the cost of equity: International evidence

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  • Maoliang Li
  • Ji Wu
  • Liansheng Zhang
  • Liping Zou

Abstract

We examine the impact of corporate board reforms on the cost of equity (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 in increases in the COE. Our results suggest that board reforms are considered inefficient to mitigate agency problems.

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  • Maoliang Li & Ji Wu & Liansheng Zhang & Liping Zou, 2020. "Board reforms and the cost of equity: International evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(5), pages 4497-4531, December.
    • Handle: RePEc:bla:acctfi:v:60:y:2020:i:5:p:4497-4531
    DOI: 10.1111/acfi.12654
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