This study examines how the implied cost of capital(ICC) effects a firm's financing and investment decisions. We find that firms with lower ICC rely more on equity financing and undertake larger mergers and acquisitions. These findings indicate that ICC captures both equity mispricing and a firm's ability to generate value from investment opportunities. Further, we discover that M&A transactions involving low-ICC bidders generate higher shareholder value, highlighting their ability to capitalize on growth opportunities. We determine that alternative measures of the cost of equity fail to replicate these results, underscoring the relevance of ICC in M&A research.
The study explores how a firm’s Diversity and Inclusion (D&I) initiatives affect its costs of debt. We find that only third-party verified D&I controversies significantly raise firms’ bond yield spreads at issuance, while self-reported D&I performance has no significant impact. Our findings suggest that the discrepancy...
Liang Guo, Lin Zhao, Yu Liu et al.· Applied Finance Letters· 0 citations
We document a broad decline in return on assets (
ROA
) among U.S. public firms from 1963 to 2020, including firms with high growth opportunities, R&D intensity and market power. Many firms earn realized returns below estimated costs of capital and valuation‐implied benchmarks. Declining asset utilization and Ric...
James S. Ang, Ying-Mei Cheng, Zhi-Qian Jiang· Accounting & Finance· 0 citations
We review the evidence on the impact of private equity (PE) ownership on firms, stakeholders, and the economy. We organize this literature using a framework that emphasizes the costs and benefits of PE as an ownership form and implies five main predictions: (
a
) Only some firms are natural PE targets, (
b
) PE o...
Per Strömberg, Christian J. Thomann· Annual Review of Financial E...· 0 citations
This article surveys evidence on the evolution of the capital share—the portion of output accruing to firm owners as after-tax profits—and its contribution to asset prices, arguing that capital share risk is a dominant driver of equity values. Using aggregate data on the US corporate sector, we show that the capital sh...
D. Greenwald, Sydney C. Ludvigson· Annual Review of Financial E...· 0 citations
This study empirically analyzes the effects of the voluntary adoption and quality of integrated reports (IRs) on the cost of equity capital in Japan. Using 514 Tokyo Stock Exchange listed firms (over 2004–2020) and employing propensity score matching, difference‐in‐differences, and fixed effects models, we find tha...
Peng Tan· Journal of Corporate Account...· 0 citations
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