Global Financial Crisis and Role of Ownership Structure on Cost of Capital

Abstract

This paper explores the relationship between ownership structure and cost of capital. Prior studies have established links between ownership structure, firm performance and cost of capital but their results are mixed and inconclusive. As ownership structure is one of the important issues faced by corporates, especially in listed companies, the objective of this study is to explore the relationship between ownership structure and cost of capital in listed companies. In addition, the role ownership structure plays is regarded as important; the expectation of managers and shareholders is to determine the optimal ownership structure that protects companies in normal and in crisis situations as well. Therefore, this study explores the role ownership structure plays in determining the cost of capital during and after the financial crisis period. After employing the panel regression method, we report a negative relationship between the ownership structure and cost of capital during a global financial crisis.