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Corporate Governance and the Cost of Capital: An International Study

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  • Feifei Zhu

Abstract

This study shows that firms with good corporate governance are consistently associated with both lower cost of equity and cost of debt capital in an international setting. The association between corporate governance and the cost of equity is more pronounced in countries with strong legal systems, extensive disclosure practices, and good government quality. However, the relation between corporate governance and the cost of debt is stronger in countries characterized by weak legal protection, low transparency, and poor government quality. The differential relations can be attributed to asymmetric payoffs received by creditors and shareholders.

Suggested Citation

  • Feifei Zhu, 2014. "Corporate Governance and the Cost of Capital: An International Study," International Review of Finance, International Review of Finance Ltd., vol. 14(3), pages 393-429, September.
    • Handle: RePEc:bla:irvfin:v:14:y:2014:i:3:p:393-429
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    File URL: http://hdl.handle.net/10.1111/irfi.12034
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