Investment and the weighted average cost of capital

• 成果类型: Article
• 署名作者: Frank, Murray Z.; Shen, Tao
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; Tsinghua University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2015.09.001
• 发表日期: 2016
• 页码: 300-315
• 关键词: Weighted average cost of capital; INVESTMENT; CAPM; Implied cost of capital

摘要

In a standard q-theory model, corporate investment is negatively related to the cost of capital. Empirically, we find that the weighted average cost of capital matters for corporate investment. The form of the impact depends on how the cost of equity is measured. When the capital asset pricing model (CAPM) is used, firms with a high cost of equity invest more. When the implied cost of capital is used, firms with a high cost of equity invest less. The implied cost of capital can better reflect the time-varying required return on capital. The CAPM measure reflects forces that are outside the standard model. (C) 2015 Published by Elsevier B.V.