Do Co-opted boards affect the cost of equity capital?

Md. Borhan Uddin Bhuiyan, Pinprapa Sangchan and Mabel D' Costa

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

Abstract: This paper contributes to the corporate governance and capital market literature by documenting the association between board co-option and the cost of equity capital. We argue that board co-option facilitates better CEO-director counselling and better coordination of the CEO-director relationship, which signals future earnings predictability and reduces information risk, resulting in a lower cost of equity capital. Using data from Australian listed companies from 2001 to 2015, our analyses reveal that board co-option is associated, significantly and negatively, with firms’ cost of equity and, thus, supports the beneficial view of board co-option.

Keywords: Co-option; Cost of equity capital; Australia (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:pb:s1544612321004670

DOI: 10.1016/j.frl.2021.102491

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