Corporate governance and the cost of equity: Evidence from the developing country

Journal of Governance and Regulation

article

Mahmoud A. Odat¹  Khaldoon Ahmad Al Daoud²  Ziad Mohammad Zurigat³ 

[1] Department of Accounting, Faculty of Economics and Administrative Sciences, Yarmouk University;Department of Accounting, Faculty of Economics and Administrative Sciences, Yarmouk University, Irbid, Jordan Contact details: Yarmouk University;Department of Banking & Finance, Faculty of Economics and Administrative Sciences, Yarmouk University

关键词: Corporate Governance;    Board of Directors;    Cost of Equity;    Jordan;   

DOI  :  10.22495/jgrv10i4art13

学科分类：社会科学、人文和艺术（综合）

来源: Virtus Interpress

【 摘 要 】

This study examines the impact of corporate governance mechanisms on a firm’s cost of equity. The corporate governance mechanisms examined consist of board size, board independence, CEO duality, multiple directorships held by board members, and board political influence. To accomplish the study objective, 210 firm-year observations for manufacturing companies listed on Amman Stock Exchange (ASE) in the period 2014–2018 are analyzed using panel data analysis techniques. The results of the fixed effects regression model reveal that CEO duality and board political influence negatively affect the cost of equity, while there is no significant effect of board size, board independence, and multiple directorships on the cost of equity. The results suggest that firms’ board of directors is an important factor in mitigating the agency problem suggested by Jensen and Meckling (1976). They also suggest that information risk is priced, which is consistent with previous research such as Easley, Hvidkjaer, and O’Hara (2002), and that the board of directors plays a role in reducing that risk in capital markets.

【 授权许可】

CC BY-NC