Stock market integration, cost of equity capital and corporate investment: evidence from Brazil

Research output: Contribution to journalArticle

Abstract

We study the effect of stock market integration on the cost of capital and investment, using Brazil as a case study. We show that integration, as proxied by foreign ownership, has a positive impact on the financing side by reducing cost of capital. On the output side, we find that integration increases corporate investment, but only for well-governed firms. We contribute to the debate on the pros and cons of financial globalisation, particularly by providing evidence of important linkages between financial integration and real economic activity.
LanguageEnglish
Pages181-206
Number of pages26
JournalEuropean Financial Management
Volume25
Issue number1
Early online date27 Sep 2017
DOIs
Publication statusPublished - 31 Jan 2019

Fingerprint

Stock market integration
Cost of capital
Cost of equity capital
Corporate investment
Capital investment
Brazil
Foreign ownership
Financial globalization
Financing
Linkage
Economic activity
Financial integration

Keywords

  • stock market integration
  • investment
  • capital
  • Brazil
  • financial globalisation

Cite this

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abstract = "We study the effect of stock market integration on the cost of capital and investment, using Brazil as a case study. We show that integration, as proxied by foreign ownership, has a positive impact on the financing side by reducing cost of capital. On the output side, we find that integration increases corporate investment, but only for well-governed firms. We contribute to the debate on the pros and cons of financial globalisation, particularly by providing evidence of important linkages between financial integration and real economic activity.",
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