CEO–board connections and the cost of equity capital: International evidence

Md Nazmul Hasan Bhuyan and David Javakhadze

Journal of Financial Research, 2024, vol. 47, issue 2, 317-365

Abstract: In this article, we investigate the effect of chief executive officer (CEO)–board connections on the cost of equity capital in an international setting. We find that CEO–board connections have a significant negative effect on the cost of equity. Our results are robust to alternative variable measurements, model specifications, and potential endogeneity adjustments. Examining the channel, we show that social ties reduce information asymmetry issues. We further show that firm‐level operational complexities and investment intensity, as well as country‐level developmental attributes and culture, moderate the association between CEO–board connections and the cost of equity capital.

Date: 2024
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https://doi.org/10.1111/jfir.12366

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfnres:v:47:y:2024:i:2:p:317-365

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