 Geographic location, foreign ownership, and cost of equity capital: Evidence from privatizationNarjess Boubakri, Omrane Guedhami and Walid Saffar Journal of Corporate Finance, 2016, vol. 38, issue C, 363-381 Abstract: Motivated by recent research on the link between geographic proximity and information risk, we examine the impact of geographic location on a firm's ownership structure and cost of equity capital using a large sample of newly privatized firms from 47 countries. We find that the greater the firm's distance from domestic financial centers, the lower foreign investors' participation and ownership. We also find that strong country-level institutions governing investor protection mitigate the information disadvantage of foreign investors. In additional analyses, we find that investors require higher cost of equity capital for distant privatized firms, especially in countries with weak governance institutions. We conclude that geographic location is an important determinant of post-privatization ownership structure and cost of equity capital. Our results are robust to alternative explanations and suggest that improving country-level governance institutions can mitigate the adverse effect of location in remote areas. Keywords: Privatization; Geographic location; Ownership structure (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:38:y:2016:i:c:p:363-381 DOI: 10.1016/j.jcorpfin.2016.02.004 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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