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Stock market integration, cost of equity capital, and corporate investment: Evidence from Brazil

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  • David Hillier
  • Tiago Loncan

Abstract

We study the effect of stock market integration on the cost of capital and investment, using Brazil as a case study. We show that integration, as proxied by foreign ownership, has a positive impact on the financing side by reducing cost of capital. On the output side, we find that integration increases corporate investment, but only for well‐governed firms. We contribute to the debate on the pros and cons of financial globalization, particularly by providing evidence of important linkages between financial integration and real economic activity.

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  • David Hillier & Tiago Loncan, 2019. "Stock market integration, cost of equity capital, and corporate investment: Evidence from Brazil," European Financial Management, European Financial Management Association, vol. 25(1), pages 181-206, January.
    • Handle: RePEc:bla:eufman:v:25:y:2019:i:1:p:181-206
    DOI: 10.1111/eufm.12147
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