This study provides empirical evidence on the role of ultimate ownership structure in explaining the variations in firms' cost of equity capital across 21 countries. Using four implied cost of equity proxies, the results show that the large discrepancy between ownership and control rights of the ultimate owner has a positive and significant impact on the firm's cost of equity capital, after controlling for traditional risk factors known in empirical literature. The finding lends support to the entrenchment effect in that the expropriation of the minority investors by the controlling owners increases the systematic risk of the company thereby increases the firm's external financing cost. Further analyses demonstrate that both the legal and extra-legal institutions play an important tank in constraining the higher equity cost as induced by the concentrated ownership structure. In particular, in countries with broad disclosure requirements, strong securities regulations enforcement, keen market competition and high tax compliance, the positive relation between the cost of equity capital and the ownership-control divergence of the ultimate owner is less pronounced. The findings suggest that the institutional factors are effective corporate governance mechanisms and are significant in explaining the international variations in the cost of equity capital. / Chu, Sin Yan Teresa. / Adviser: Woody Wu. / Source: Dissertation Abstracts International, Volume: 70-06, Section: A, page: 2121. / Thesis (Ph.D.)--Chinese University of Hong Kong, 2008. / Includes bibliographical references (leaves 67-73). / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. [Ann Arbor, MI] : ProQuest Information and Learning, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Abstracts in English and Chinese. / School code: 1307.
| Identifer | oai:union.ndltd.org:cuhk.edu.hk/oai:cuhk-dr:cuhk_344349 |
| Date | January 2008 |
| Contributors | Chu, Sin Yan Teresa., Chinese University of Hong Kong Graduate School. Division of Accountancy. |
| Source Sets | The Chinese University of Hong Kong |
| Language | English, Chinese |
| Detected Language | English |
| Type | Text, theses |
| Format | electronic resource, microform, microfiche, 1 online resource (iv, 83 leaves : ill.) |
| Rights | Use of this resource is governed by the terms and conditions of the Creative Commons “Attribution-NonCommercial-NoDerivatives 4.0 International” License (http://creativecommons.org/licenses/by-nc-nd/4.0/) |
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