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The impact of COVID-19 on firms’ cost of equity capital: Early evidence from U.S. public firms

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  • Ke, Yun

Abstract

This paper examines how the COVID-19 pandemic affects firms’ cost of equity capital. I use analyst earnings forecasts and stock prices data to estimate firms’ cost of equity capital. With 18,740 firm-month observations from September 2019 to August 2020, I show that firms experienced an increase in the cost of equity capital during the pandemic. On average, the cost of equity capital increased about 172 basis-points. The effect is also more pronounced in firms with greater COVID-19 exposure. Overall, I document a significantly adverse impact of COVID-19 on firms’ cost of capital.

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  • Ke, Yun, 2022. "The impact of COVID-19 on firms’ cost of equity capital: Early evidence from U.S. public firms," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321002981
    DOI: 10.1016/j.frl.2021.102242
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    Cited by:

    1. D’Augusta, Carlo & Grossetti, Francesco, 2023. "How did Covid-19 affect investors’ interpretation of earnings news? The role of accounting conservatism," Finance Research Letters, Elsevier, vol. 52(C).
    2. Khanh Hoang & Cuong Nguyen & Dung Viet Tran & Anh Phan, 2022. "International Corporate Cash Holdings and Firm-Level Exposure to COVID-19: Do Cultural Dimensions Matter?," JRFM, MDPI, vol. 15(6), pages 1-14, June.
    3. Fasano, Francesco & Javier Sánchez-Vidal, F. & La Rocca, Maurizio, 2022. "The role of government policies for Italian firms during the COVID-19 crisis," Finance Research Letters, Elsevier, vol. 50(C).

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    More about this item

    Keywords

    COVID-19; Pandemic; Cost of equity capital; COVID-19 exposure; Health crisis;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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