International differences in the cost of equity capital: Do legal institutions and securities regulation matter?

• 成果类型: Article
• 署名作者: Hail, L; Leuz, C
• 署名单位: University of Pennsylvania
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/j.1475-679X.2006.00209.x
• 发表日期: 2006
• 页码: 485-531
• 关键词: investor protection; economic consequences; CORPORATE DISCLOSURE; cross-section; WORLD PRICE; earnings; MARKET; RISK; equilibrium; INFORMATION

摘要

This paper examines international differences in firms' cost of equity capital across 40 countries. We analyze whether the effectiveness of a country's legal institutions and securities regulation is systematically related to cross-country differences in the cost of equity capital. We employ several models to estimate firms' implied or ex ante cost of capital. Our results support the conclusion that firms from countries with more extensive disclosure requirements, stronger securities regulation, and stricter enforcement mechanisms have a significantly lower cost of capital. We perform extensive sensitivity analyses to assess the potentially confounding influence of countries' long-run growth differences on our results. We also show that, consistent with theory, the cost of capital effects of strong legal institutions become substantially smaller and, in many cases, statistically insignificant as capital markets become globally more integrated.