Publication detail

A Survey of External and Internal Factors Influencing the Cost of Equity

MOKHOVA, N. ZINECKER, M.

Original Title

A Survey of External and Internal Factors Influencing the Cost of Equity

Type

journal article in Web of Science

Language

English

Original Abstract

The cost of equity is an essential element of a business' financial decision-making process, which is influenced by a number of internal and external factors. This study intends to answer the question on how Czech CFOs perceive the impact of overall-economic and firm-specific factors on the cost of equity. The survey was carried out in 2015 and our sample covers 40 respondents. The findings show that there is a gap between the theory and practice and that the country’s specifics, in particular the low level of the financial market development, play a significant role in the perception of cost of equity capital determinants. First, the most commonly used cost of equity estimation approach is based on average historical returns. A considerably large number of the CFOs think that the ownership structure, dividend policy, ability to forecast financial results, stability of company´s earnings and flexibility in capital raising are the internal factors with the most significant impact on the cost of equity. Otherwise, a rather low number of respondents consider the information asymmetry, corporate governance and financial performance as having a strong influence on the cost of equity. In regard to the external factors, a substantial majority of the respondents acknowledges that the long- and short-term interest rates as well as inflation, sovereign debt and risks linked to the banking system and financial market strongly affect the cost of equity.

Keywords

Cost of Equity; Capital, External Factors; Internal Factors, Economic Policy; Financial Stability; Disclosure; Corporate Governance; Social Factors; Survey; Czech Republic

Authors

MOKHOVA, N.; ZINECKER, M.

Released

2. 5. 2019

Publisher

KAUNAS UNIV TECHNOL

Location

KAUNAS, LITHUANIA

ISBN

1392-2785

Periodical

Engineering Economics

Year of study

30

Number

2

State

Republic of Lithuania

Pages from

173

Pages to

186

Pages count

14

URL

http://inzeko.ktu.lt/index.php/EE/article/view/19221

Full text in the Digital Library

http://hdl.handle.net/11012/201693

BibTex

@article{BUT157975,
  author="Natalia {Mokhova} and Marek {Zinecker}",
  title="A Survey of External and Internal Factors Influencing the Cost of Equity",
  journal="Engineering Economics",
  year="2019",
  volume="30",
  number="2",
  pages="173--186",
  doi="10.5755/j01.ee.30.2.19221",
  issn="1392-2785",
  url="http://inzeko.ktu.lt/index.php/EE/article/view/19221"
}