Impact of Corporate Governance on Cost of Capital: Moderating Role of Foreign Ownership

Abstract

Abstract. The purpose of this study is to examine the impact of corporate governance mechanism with moderating role of foreign ownership on the cost of capital. The 108 listed nonfinancial firm’s annual data, ranging from 2011 to 2017, is extracted from annual reports. The ordinary least square method has been used with different techniques such as common, fixed, and random effect models but most variables were significant in the common effect model. The statistical findings of the study indicate that there is a significant relationship between corporate governance mechanisms and the cost of capital in non-financial firms of Pakistan. To some extent foreign ownership moderates, the relationship between the audit committee, board of directors’ managerial ownership, and cost of capital and leverage (debt to asset ratio) plays a controlling role among these variables. All non-financial firms should increase the environment of foreign ownership in their firms for the profit maximization and development of the economy.