Firm internationalization and cost of equity: Evidence from China

This paper examines the relationship between firm internationalization and cost of equity. We find that firms with a higher degree of international operations have a significantly lower cost of equity, which is more pronounced for firms in provinces with a weak institutional environment or firms exp...

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Bibliographic Details
Published inChina journal of accounting research Vol. 15; no. 2; p. 100237
Main Authors Yang, Jianfa, Cai, Guilong, Zheng, Guojian, Gu, Qiankun
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.06.2022
Elsevier
Subjects
China
Cost of equity
F21
Firm internationalization
G14
Industry competition
Institutional constraints
O16
Industry competition
F21
O16
China
Cost of equity
Institutional constraints
G14
Firm internationalization
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Summary:This paper examines the relationship between firm internationalization and cost of equity. We find that firms with a higher degree of international operations have a significantly lower cost of equity, which is more pronounced for firms in provinces with a weak institutional environment or firms experiencing intense domestic competition. Our results are robust after adopting a firm fixed effect model, propensity score matching, difference-in-difference regressions and alternative measurements of key variables. Further, international operations help firms to break through their institutional constraints in the domestic market, which reduces the cost of equity and improves resource allocation efficiency in the capital market. Our paper enriches the literature on firm internationalization and the cost of equity from the perspective of emerging markets.
ISSN:1755-3091
2214-1421
DOI:10.1016/j.cjar.2022.100237