Inferring Cost of Equity Using Firm Characteristics
نویسنده
چکیده
The paper tests an approach based on firm characteristics to imply cost of equity in Canadian dollar. Using a sample of Canadian non-financial firms represented in I/B/E/S and Compustat Canadian files, and along the lines of Gebhardt, Lee, Swaminathan (2001), the paper proposes a five-factor model to estimate cost of equity ex-ante for Canadian firms. The five factors are dispersion of analyst forecasts, long-term growth rate, leverage, book to market ratio, and number of analysts following the firm.
منابع مشابه
Tax avoidance and Firms Cost of Equity: The Moderating Role of outside Monitoring
Literature in tax avoidance indicates that the proceeds of tax avoidance can be invested on production affairs, which in turn enhance the future expected cash flow, thereby reducing the cost of equity. Based on this reasoning, the present study aims to examine whether tax avoidance is associated with the cost of equity with emphasis on the moderating effect of outside monitoring. To calculate t...
متن کاملFirm Website And Cost Of Equity
Websites have become an essential component in firms’ IT portfolios. Many business processes require website functionalities to operate smoothly. This study aims at investigating how firm website affects cost of equity, an important factor in firm valuation. We conducted a cross-sectional regression using a unique dataset consisting of 3,312 firm websites operated by US public firms. Firm websi...
متن کامل– NOT FOR PUBLICATION – Online Appendix for “ External Equity Financing Shocks , Financial Flows , and Asset Prices ”
This appendix contains tables and figures that supplement the analysis in the paper. Section A presents the asset pricing test results with equity issuance cost shocks constructed using alternative definitions of equity issuance. Section B presents the asset pricing test results with equity issuance cost shocks constructed by taking averages of portfolio-level equity issuance shocks across port...
متن کاملEstimating and Comparing the Implied Cost of Equity for Canadian and U.S. Firms
This paper estimates the implied cost of equity for Canadian and U.S. firms using a methodology based on the dividend discount model and utilizing firms’ current stock price and analysts’ forecasted earnings. We find that firm size and firm stock liquidity are negatively related to cost of equity, while greater firm financial leverage and greater dispersion in analysts’ earnings forecasts are a...
متن کاملEssays on Corporate Investment by Yongjin Kim
In the first essay (joint work with Bryan Routledge), we calculate the value implications of suboptimal capital budgeting decisions in an asset-pricing model calibrated to match the standard asset pricing empirical properties – in particular, the time-variation in the equity premium. Specifically, we calculate that an investment policy that ignores the time variation in the equity premium, such...
متن کامل