Open AccessImpact of Corporate Governance on the Cost of Capital: Empirical Evidence from the Non-Financial Sector of Pakistan
Author(s) -
Muhammad Bilal Ijaz,
Muhammad Naveed,
Hassan Raza
Publication year - 2021
Publication title -
journal of accounting and finance in emerging economies
Language(s) - English
Resource type - Journals
eISSN - 2519-0318
pISSN - 2518-8488
DOI - 10.26710/jafee.v7i2.1789
Subject(s) - corporate governance , stock exchange , panel data , cost of capital , leverage (statistics) , monetary economics , business , financial capital , finance , economics , financial sector development , accounting , financial system , financial sector , market economy , human capital , incentive , machine learning , computer science , econometrics
Purpose: The study looked at the effect of corporate governance on the cost of capital of firms in Pakistan's non-financial sector.
Design/Methodology/Approach: The study sample is comprised of balanced data set of 175 non-financial companies listed on the Pakistan Stock Exchange between 2008 and 2018. The study used the dynamic panel GMM estimator technique.
Findings: The findings revealed that an increase in the number of directors, board independence, CEO duality, and inflation negatively influence the cost of capital. On the other hand, the increase in institutional holdings increased the cost of capital. In addition, it is discovered that board committees, political connections, and economic growth do not affect the cost of capital
Implications/Originality/Value: When board size, CEO duality, board independence, and inflation increased, the cost of capital decreased in Pakistan's non-financial sector. Furthermore, board committees, political connections, company leverage, and economic growth do not affect the cost of capital in Pakistan's non-financial sector. In comparison, an increase in institutional shareholding increased the cost of capital in Pakistan's non-financial sector.