Bank capital and the cost of equity

Abstract Using a sample of publicly listed banks from 62 countries over the 1991–2017 period, we investigate impact capital on banks’ cost equity. Consistent with theoretical prediction that more equity in mix leads to fall firms’ costs equity, find better capitalized enjoy lower costs. Our baseline estimations indicate 1 percentage point increase bank’s equity-to-assets ratio lowers its by about 18 basis points. results also suggest form investors value most is sheer capital; other forms capital, such as Tier 2 regulatory are less (or not at all) valued investors. Additionally, our main finding has negative effect holds both developed and developing countries. The this paper provide missing evidence debate effects higher requirements funding