Stock market integration, cost of equity capital and corporate investment : evidence from Brazil

Hillier, David and Loncan, Tiago (2019) Stock market integration, cost of equity capital and corporate investment : evidence from Brazil. European Financial Management, 25 (1). pp. 181-206. ISSN 1354-7798 (https://doi.org/10.1111/eufm.12147)

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Abstract

We study the effect of stock market integration on the cost of capital and investment, using Brazil as a case study. We show that integration, as proxied by foreign ownership, has a positive impact on the financing side by reducing cost of capital. On the output side, we find that integration increases corporate investment, but only for well-governed firms. We contribute to the debate on the pros and cons of financial globalisation, particularly by providing evidence of important linkages between financial integration and real economic activity.

ORCID iDs

Hillier, David ORCID logoORCID: https://orcid.org/0000-0002-1591-4038 and Loncan, Tiago ORCID logoORCID: https://orcid.org/0000-0002-2713-4055;
CORE (COnnecting REpositories)