Management integrity and the cost of equity capital: Evidence from Chinese listed firms

Mo Yang, Sishi Yue, Dayong Dong and Jiawei Cao

Research in International Business and Finance, 2025, vol. 77, issue PA

Abstract: This paper empirically investigates the relationship between management integrity, as assessed using textual analysis and machine learning techniques based on the Upper Echelons Theory and Trust Theory from social psychology, and the cost of equity capital. The findings demonstrate that the integrity-related language disclosed in the management discussion and analysis (MD&A) reflects the internal ethical standards of managers, and is negatively associated with the cost of equity capital. Corporate governance and information asymmetry serve as channels through which management integrity influences capital costs, respectively. Further analysis identifies the negative correlation between management integrity and capital costs is particularly noticeable in firms with a non-state-owned nature or a robust regional legal system. Additionally, management integrity exhibits a positive association with the company’s future value. Briefly, this study contributes to existing literature on managerial personal characteristics, and provides practical recommendations for talent management at the executive level in enterprises.

Keywords: Management integrity; Cost of equity capital; Corporate governance; Information asymmetry (search for similar items in EconPapers)
JEL-codes: G34 M10 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531925001916
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:77:y:2025:i:pa:s0275531925001916

DOI: 10.1016/j.ribaf.2025.102935

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().