The Effect of Different Corporate Governance Mechanism on Cost of Equity

• Main Authors: HSIEH, CHIA-HSIN, 謝家欣
• Other Authors: JIANG, JIA-XUN
• Format: Others
• Language: zh-TW
• Published: 2019
• Online Access: http://ndltd.ncl.edu.tw/handle/9272q8

碩士 === 輔仁大學 === 會計學系碩士班 === 107 === Using the data of Taiwanese listed companies excluding the financial industry from years 1996 to 2017, this study examines the relationship between corporate governance and the cost of equity of Taiwanese listed companies. Based on the five corporate governance mechanisms announced by OECD, which are:(1) capital structure, (2) board function and professionalism, (3) fairness on treating fund providers, (4) information disclosure and transparency, and (5) corporate social responsibility, we structure our own corporate governance system with five mechanisms, with the information disclosure and transparency structure primary measured by financial reporting quality. Six methods of the implied cost of capital are applied as our proxy of the cost of capital, which are: GLS, CT, GG, OJ, PEG, and MPEG. When forecasts of future earnings are needed, we use the cross-sectional earnings model developed by Hou et al. (2012) for calculation. After controlling for other factors which also affects the cost of capital, empirical results show that the higher the quality of the corporate governance is, the lower the implied cost of capital will be. When the effects of each mechanisms on the cost of capital are examined, all mechanisms except for the corporate social responsibility are shown to have a significantly negative effect on the implied cost of capital. Sensitivity tests shows that both the board function and professionalism structure and the information disclosure and transparency structure (also referred as the financial reporting quality structure throughout this paper) have significantly negative effects on all methods of the implied cost of capital.