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How Does Government Policy Affect Equity Risk Premium?

Author

Listed:
  • Nahil Boussiga

    (Department of Management, University of Carthage)

  • Ezzeddine Abaoub

    (University of Tunis El Manar)

Abstract

This study examines the effect of country-level governance quality on equity risk premium using a panel dataset of 122 developed, emerging and developing economies over the period 2000-2012. Governance quality is measured by worldwide governance indicators. We use other determinants of equity risk premium as independent variables in the model which are inflation, consumption preferences, economic risk, international financial integration and binary variable 'Crisis'. Our results show that better governance quality translates into lower equity risk premium. This paper has strong policy implications for policy makers. In fact, a good government policy is essential in order to attract foreign investors.

Suggested Citation

  • Nahil Boussiga & Ezzeddine Abaoub, 2015. "How Does Government Policy Affect Equity Risk Premium?," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 4(2), pages 65-75.
    • Handle: RePEc:ods:journl:v:4:y:2015:i:2:p:65-75
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    References listed on IDEAS

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    Cited by:

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    3. Umit Karagozlu, 2016. "Managing Risks in Commercial Banks," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 5(4), pages 250-263, November.

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