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The Cost of Capital of Cross-listed Firms


  • Kees G. Koedijk
  • Mathijs A. van Dijk


"This paper analyses the cost of capital of firms with foreign equity listings. Our purpose is to shed light on the question whether international and domestic asset pricing models yield a different estimate of the cost of capital for cross-listed stocks. We distinguish between (i) the multifactor ICAPM of Solnik (1979) and Sercu (1980) including both the global market portfolio and exchange rate risk premia and (ii) the single factor domestic CAPM. We test for the significance of the cost of capital differential in a sample of 336 cross-listed stocks from nine countries in the period 1980-99. Our hypothesis is that the cost of capital differential is substantial for firms with international listings, as these are often large multinationals with a strong international orientation. We find that the asset pricing models yield a significantly different estimate of the cost of capital for only 12% of the cross-listed companies. The size of the cost of capital differential is around 50 basis points for the US, 80 basis points for the UK and 100 basis points for France." Copyright Blackwell Publishers Ltd, 2004.

Suggested Citation

  • Kees G. Koedijk & Mathijs A. van Dijk, 2004. "The Cost of Capital of Cross-listed Firms," European Financial Management, European Financial Management Association, vol. 10(3), pages 465-486.
  • Handle: RePEc:bla:eufman:v:10:y:2004:i:3:p:465-486

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    References listed on IDEAS

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    Cited by:

    1. Lindner, Thomas & Muellner, Jakob & Puck, Jonas, 2016. "Cost of Capital in an International Context: Institutional Distance, Quality, and Dynamics," Journal of International Management, Elsevier, vol. 22(3), pages 234-248.

    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting


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