The impact of COVID-19 on firms’ cost of equity capital: Early evidence from U.S. public firms

Yun Ke

Finance Research Letters, 2022, vol. 46, issue PA

Abstract: This paper examines how the COVID-19 pandemic affects firms’ cost of equity capital. I use analyst earnings forecasts and stock prices data to estimate firms’ cost of equity capital. With 18,740 firm-month observations from September 2019 to August 2020, I show that firms experienced an increase in the cost of equity capital during the pandemic. On average, the cost of equity capital increased about 172 basis-points. The effect is also more pronounced in firms with greater COVID-19 exposure. Overall, I document a significantly adverse impact of COVID-19 on firms’ cost of capital.

Keywords: COVID-19; Pandemic; Cost of equity capital; COVID-19 exposure; Health crisis (search for similar items in EconPapers)
JEL-codes: G12 I18 M10 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321002981

DOI: 10.1016/j.frl.2021.102242

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