scholarly journals International Real Estate Review

2019 ◽  
Vol 22 (3) ◽  
pp. 399-430
Author(s):  
Francesco Busato ◽  
◽  
Cuono Massimo Coletta ◽  
Maria Manganiello ◽  
◽  
...  
Keyword(s):  
Real Estate ◽  
Factor Model ◽  
Five Factor Model ◽  
Estimation Method ◽  
Capital Budgeting ◽  
Equity Capital ◽  
Forecast Errors ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
The Cost

One of the fundamental concepts in financial economics is the cost of equity capital. The cost of equity is an important tool often used by a firm as a capital budgeting threshold for the required rate of return. The cost of equity of a firm also represents the compensation the market demands in exchange for owning the asset and bearing the risk of ownership. This paper focuses on the cost of equity capital estimates for a particular U.S. industry, the real estate investment trust (REIT) industry, to highlight the key role played by the choice of estimation method on the distant forecast. By using a comprehensive sample of 51 REITs over the period of January 1997 to December 2014, we compare the ¡§hybrid beta¡¨ approach developed by Cosemans et al. (2016) with the Carhart four-factor model, the REIT-factor model in Chen et al. (2012) and the five-factor model formulated by Fama and French (2015). Our results demonstrate the superiority of the ¡§hybrid beta¡¨ approach, which almost always produces, at the firm and portfolio-levels, absolute forecast errors that are lower than those of the other models implemented in our study.

scholarly journals The Cost of Equity Capital on Developing Equity Markets: Estimations for Selected Slovene Companies

2010 ◽  
Vol 5 (1) ◽  
pp. 67-74
Author(s):  
Igor Stubelj
Keyword(s):  
Equity Markets ◽  
Capital Budgeting ◽  
Cash Flows ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Publicly Traded Companies ◽  
And Performance ◽  
The Cost ◽  
Free Cash Flows

The Cost of Equity Capital on Developing Equity Markets: Estimations for Selected Slovene CompaniesThe article sheds light on the estimation of the cost of equity capital on a developing equity market. The cost of equity is important; it is crucial in capital budgeting decisions and performance evaluation. It determines the minimum yield the investors require on the invested capital and we use it as a discount rate to calculate the present value of the expected free cash flows to equity. The aim of this paper is to tackle the estimation of the cost of equity capital on developing markets with the example of estimation for ten Slovene publicly traded companies. The estimated cost of capital for the selected Slovene companies is between 9,7% and 13,7%.

Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting

2011 ◽  
Vol 86 (1) ◽  
pp. 59-100 ◽  
Author(s):  
Dan S. Dhaliwal ◽  
Oliver Zhen Li ◽  
Albert Tsang ◽  
Yong George Yang
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Voluntary Disclosure ◽  
Equity Capital ◽  
Forecast Errors ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Csr Disclosure ◽  
Corporate Social ◽  
The Cost

ABSTRACT: We examine a potential benefit associated with the initiation of voluntary disclosure of corporate social responsibility (CSR) activities: a reduction in firms’ cost of equity capital. We find that firms with a high cost of equity capital in the previous year tend to initiate disclosure of CSR activities in the current year and that initiating firms with superior social responsibility performance enjoy a subsequent reduction in the cost of equity capital. Further, initiating firms with superior social responsibility performance attract dedicated institutional investors and analyst coverage. Moreover, these analysts achieve lower absolute forecast errors and dispersion. Finally, we find that firms exploit the benefit of a lower cost of equity capital associated with the initiation of CSR disclosure. Initiating firms are more likely than non-initiating firms to raise equity capital following the initiations; among firms raising equity capital, initiating firms raise a significantly larger amount than do non-initiating firms.

scholarly journals Effects of integrated reporting on the cost of capital and analysts’ forecasts errors: A study of Johannesburg Stock Exchange listed mining firms

2021 ◽  
Vol 14 (1) ◽  
Author(s):  
Bhekisisa N. Ngcobo ◽  
Mabutho Sibanda
Keyword(s):  
Stock Exchange ◽  
Equity Capital ◽  
The Body ◽  
Forecast Errors ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Integrated Reporting ◽  
Johannesburg Stock Exchange ◽  
The Cost

Orientation: Integrated reporting (IR) has gained traction over the last decade. Although IR became mandatory for all firms listed on Johannesburg Stock Exchange (JSE) in 2010, the International Integrated Reporting Council (IIRC) issued the IR framework in December 2013.Research Purpose: The study seeks to investigate the effects of IR on the cost of equity capital and analysts’ forecast errors for the mining firms listed on JSE.Motivation for the study: A large part of empirical evidence highlights benefits of IR; however, some studies still find no link between the quality of integrated reports and economic benefits for the reporting firm. It is against this backdrop that the study investigates effects of integrated reports on the cost of equity capital and analysts’ forecast errors.Research approach, design and method: We use a quantitative research design to test effects of IR on the cost of equity capital and analysts’ forecast errors. We study used a panel regression to analyse relationship amongst IR, cost of equity capital and analysts’ forecast errors.Main findings: The study found a significant negative relationship between IR scores and cost of equity and analysts’ forecast errors.Practical or managerial application: The findings of the study could incentivise managers in other jurisdictions where IR is not mandatory. Furthermore, findings may contribute to the existing discourse on firm-based benefits related to the quality of IR.Contribution or value addition: The study contributes to the body of knowledge with regard to possible benefits associated with compliance with the IR reporting framework.

scholarly journals Green Building, Cost of Equity Capital and Corporate Governance: Evidence from US Real Estate Investment Trusts

2020 ◽  
Vol 12 (9) ◽  
pp. 3680
Author(s):  
Hui-Ching Hsieh ◽  
Viona Claresta ◽  
Thi Bui
Keyword(s):  
Corporate Governance ◽  
Real Estate ◽  
Green Building ◽  
Real Estate Investment Trusts ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Real Estate Investment ◽  
Investment Trusts ◽  
The Cost

Distinct from the existing literature, which mainly focuses on the impacts of green building practices on the owners’ benefits, this paper examines capital market participants’ perceptions of green building, specifically, the cost of equity capital. The study uses data regarding the United States Real Estate Investment Trusts (US REITs) from 2000 to 2016, employing a panel regression analysis and adopting a Price Earnings Growth (PEG) ratio model for the cost of equity capital estimation. We find a negative relationship between green building certification and the cost of equity capital. Our results encourage REITs to participate in green building certification and aim for higher green building rankings. In addition, we examine whether corporate governance could affect the intensity of green building practices in REITs. It is found that corporate governance practices implemented to align shareholders’ and managers’ interests, such as higher institutional holdings and a less dispersed ownership structure, positively impact firms’ resource allocation for green initiatives. The results suggest there could be mutual benefits for both economic profits and sustainable buildings.

scholarly journals Information Asymmetry, Ownership Structure and Cost of Equity Capital: The Formation for Open Innovation

2021 ◽  
Vol 7 (1) ◽  
pp. 48
Author(s):  
Ade Imam Muslim ◽  
Doddy Setiawan
Keyword(s):  
Stock Market ◽  
Information Asymmetry ◽  
Ownership Structure ◽  
Trading Volume ◽  
Foreign Ownership ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Ownership Structures ◽  
The Cost

Our study aims to investigate how information asymmetry and ownership structure affect cost of equity capital. For that purpose, we collected 246 issuers over 4 years for a total of 984 observations. By using panel data processing, we found that the information asymmetry we proxied through Price non-Synchronization and trading volume had an effect on the cost of equity capital. Our results also confirmed both Agency Theory and Pecking Order Theory. Both theories are in line with the conditions of the stock market in Indonesia. In addition, we found that institutional and foreign ownership structures also had an effect on the cost of equity capital. Furthermore, our results also confirmed Interest Alignment Theory and Entrenchment Theory. Our research is expected to contribute to the debate on the existence of information asymmetry and ownership structures in relation to the cost of equity capital. We also hope that it will be a valuable input for investors in considering their investment. Moreover, from the results of this study, investors can also consider foreign ownership or institutional ownership in determining their investment. In addition, stock market regulators in Indonesia can develop approaches to minimize information asymmetry and encourage foreign investors to invest in Indonesia.

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