Geographic Diversification, Corporate Governance and Cost of Equity Capital

• Main Authors: Yu-ShiangHuang, 黃郁翔
• Other Authors: Ming-Long Wang
• Format: Others
• Language: en_US
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/76183915899245926339

碩士 === 國立成功大學 === 財務金融研究所 === 103 === This study mainly examines the effect of geographic diversification and corporate governance on firm’s cost of equity capital. We use the data of global corporations across over 33 countries from 2002 through 2012, and firm samples are classified into those from the United States, Japan and other countries. The results show regardless of country, increases in geographic diversification increases firm cost of equity capital, while the better the corporate governance, the lower the cost of equity capital. Therefore, this study further examines the interaction effect of geographic diversification and corporate governance on firm cost of equity capital. The results show that the interaction effect is inconsistent in every country. We find the cost of equity capital to decrease in Japan and to increase in United States. One specific explanation for this result is because both the organization and scale of United States multinational firms are larger and more complex, this may result in large coordination costs between corporate policies and monitoring costs when diversifying overseas, thereby increasing firm cost of equity capital.