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EXTERNAL GOVERNANCE AND THE COST OF EQUITY FINANCING
Author(s) -
Sassi Syrine,
Saadi Samir,
Boubaker Sabri,
Chourou Lamia
Publication year - 2019
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/jfir.12197
Subject(s) - equity capital markets , equity (law) , cost of capital , corporate governance , product market , business , equity risk , cost of equity , finance , private investment in public equity , market competition , economics , monetary economics , private equity , market economy , political science , law , incentive
We examine whether and how competitive pressure in the product market influences the cost of equity capital. Using a large panel of U.S. public firms, we find that intensification of product market competition results in lower equity financing costs. Our results are statistically significant and economically sizable. In line with the view of the disciplinary role of product market competition, we show that corporate governance, payout policy, and investment policy are channels through which competitive pressure influences the cost of equity capital.