In search of the corporate governance risk premium embedded into the cost of capital

The paper proposes to intend the firm as a “nexus of stakeholders”, each bearing return-to-risk expectations about sharing corporate performance. All stakeholders must achieve their own satisfaction through bargaining contracts that be sustainable, i.e., keep both and its stakeholders-network alive in long term. Governance is intended mechanism gives solution above puzzle. When market are complete, an optimal can easily found. But when incompleteness emerges, governance solutions misallocate performance among stakeholders. This case incomplete emerges. In fact, contests, will negotiate visible-only arguments contracts, this way binding also invisible ones, those impacting anyway on ex-post being case, risk premium (GRP) emerges medium-long run, equity investors’ performance, thus incentivizing repackage. Such GRP depends actual grade completeness one per allocation made time. proposed methodology detect then applied Italian test strength. Results show inflates 39bp cost capital with following break-down: 123bp basic-GRP from operations which increased +98bp for GRP-informative component reduced -191bp by GRP-managerial component; GRP-behavioural +90bp would lead up-to 120bp while 81bp debt leads final figure down (i.e., 123 + 98 – 191 90 81)