It is possible to associate cost of equity
estimation methods with a market's degree of integration (Fuenzalida & Mongrut, 2010; Pereiro, 2001; Stulz, 1999), as is illustrated in Table 1.
Based on equations (3) and (4) the cost of equity
can be than expressed as the follows:
Two fundamental relationships form the core knowledge base that students should possess about the cost of equity
, both from a corporate finance perspective and an investment perspective.
The forgoing describes the cost of equity
capital for a particular firm.
The literature regarding accounting quality and the cost of equity
has thus far focused primarily on publicly traded firms.
We now have a range of ways to calculate the cost of equity
- assumed to be OSC, with the possibility that PSC will be brought into the equation.
The interest rate for calculating the opportunity cost of equity
is based on the respective year's December average LIBOR (London Inter-Bank Offered Rate) for U.S.
Providing the practical results about studying the effect of information asymmetry on cost of equity
capital and cost of debts on the actual and potential investors and creditors and also managers and helping these groups in making correct and reasonable financial decisions.
(2001) proposed an alternative technique for estimating the cost of equity
. They used a discounted residual income model to generate a market implied cost of capital.
* In a cross-country sample of 32 countries during 1992-2006, we find that the cost of equity
capital tends to be higher in more individualistic and less uncertainty avoiding societies consistent with their greater risk-taking orientation.
Keywords: Corporate governance, cost of equity
, implied cost of equity
, Asian countries.
Capital investment and cost of capital are the important issues in corporate finance".4 Discussion is available mostly from developed economies on how companies evaluate projects, cost of equity
calculation and adjustment of discount rate".5 Answers to such questions are difficult from secondary data the researcher used survey answer for fulfilling the research objectives.