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Internal factors influencing the cost of equity capital

Author

Listed:
  • Natalia Mokhova

    (BUT - Brno University of Technology [Brno])

  • Marek Zinecker

    (BUT - Brno University of Technology [Brno])

  • Tomáš Meluzín

    (BUT - Brno University of Technology [Brno])

Abstract

In this paper we compile and evaluate the research available on internal factors influencing the cost of equity capital. The topic has been extensively studied for the past few decades; however, the information is spread and is not accumulated. We begin by reiterating the reasons why information asymmetry drives financial decisions. Next, we review recent literature that focuses on financial disclosure and accounting information, i.e. internal factors that are directly connected with information asymmetry. In the remainder of our review we discuss a recent debate on the impact of corporate governance and social factors. Aside from theoretical contribution, the comprehensive literature review of existing studies results in formulation of a strategy how to decrease to cost of equity capital by means of internal factors adjustments. We believe that highlighting the key points in the debate will be beneficial for both academicians and practitioners who will be able to form an independent view of the approaches how to take influence on the cost of equity capital.

Suggested Citation

  • Natalia Mokhova & Marek Zinecker & Tomáš Meluzín, 2018. "Internal factors influencing the cost of equity capital," Post-Print hal-01858341, HAL.
    • Handle: RePEc:hal:journl:hal-01858341
    DOI: 10.9770/jesi.2018.5.4(9)
    Note: View the original document on HAL open archive server: https://hal.science/hal-01858341
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    References listed on IDEAS

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    1. Robert M. Bushman & Joseph D. Piotroski & Abbie J. Smith, 2004. "What Determines Corporate Transparency?," Journal of Accounting Research, Wiley Blackwell, vol. 42(2), pages 207-252, May.
    2. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    4. Basu, Sudipta, 1997. "The conservatism principle and the asymmetric timeliness of earnings," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 3-37, December.
    5. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    6. Ng, Anthony C. & Rezaee, Zabihollah, 2015. "Business sustainability performance and cost of equity capital," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 128-149.
    7. Myers, Stewart C, 1984. "The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    8. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
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    Cited by:

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    3. Alex Borodin & Manuela Tvaronavičienė & Irina Vygodchikova & Andrey Kulikov & Marina Skuratova & Natalia Shchegolevatykh, 2021. "Improving the Development Technology of an Oil and Gas Company Using the Minimax Optimality Criterion," Energies, MDPI, vol. 14(11), pages 1-17, May.
    4. Nicko Albart & Bonar Marulitua Sinaga & Perdana Wahyu Santosa & Trias Andati, 2020. "The Controlling role of Ownership on Financial Performance and Capital Structure in Indonesia," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 9(3), pages 15-27, July.

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    More about this item

    Keywords

    cost of equity; costs reduction; corporate governance; information asymmetry; disclosure policy; social responsibility;
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