Corporate governance and cost of capital in OECD countries

Abstract

Purpose

This article aims to investigate the impact of corporate governance (CG) mechanisms on cost of capital (COC) in Organisation for Economic Co-operation and Development (OECD) countries.

Design/methodology/approach

Companies from 34 OECD countries were used between 2010 and 2017. Multiple regression analysis techniques is used to examine the relationships. The findings are robust to alternative measures and endogeneities.

Findings

The results show that CG index and director ownership are statistically negatively related to COC. In contrast, the results show that block ownership is statistically related to COC.

Originality/value

This study extends, as well as contributes to the extant CG literature by offering new evidence on the effect of CG mechanisms on COC. The findings will help regulators and policymakers in the OECD countries in evaluating the adequacy of the current CG reforms to prevent management misconduct and scandals.

Citation

AlHares, A. (2019), "Corporate governance and cost of capital in OECD countries", International Journal of Ethics and Systems, Vol. 35 No. 4, pp. 665-690. https://doi.org/10.1108/IJOES-02-2019-0043