An Empirical Investigation of Corporate Governance and Cost of Capital: The Case of Thai Listed Companies on the Stock Exchange of Thailand

  • Ailadda Ongklang Rajamangala university of technology thanyaburi

Abstract

This study explored the relationship between corporate governance and the cost of capital during the period of 2012-2014 of listed companies on the stock exchange of Thailand.  (Unlike previous studies that devised their own criteria measuring corporate governance, this study successfully introduced corporate governance proxies that were publicly available as corporate governance proxies. The cost of capital is defined as the cost of debt, cost of equity and weighted average cost of capital). Which were consisted of three main objectives including 1) to investigate the relationship between corporate governance mechanisms and cost of debt, 2) to investigate the relationship between corporate governance mechanisms and cost of equity and 3) to investigate the relationship between corporate governance mechanisms and weighted average cost of capital.  In this study, corporate governance was measured by rights of shareholders, equitable treatment of shareholders, role of stakeholders, disclosure and transparency and responsibilities of the board whereas cost of capital was determined by cost of debt, cost of equity and weighted average cost of capital.
The secondary data obtained from 1046 listed companies on the Stock Exchange of Thailand during 2012-2014 with the accounting period beginning on 1st January and ending on 31st December were employed in this study.  The samples were companies from all industrial groups except the companies in financial and securities businesses, banking and insurance businesses, and companies under rehabilitation.  The data were analyzed by means of Multiple Linear Regression at the statistical significant level of 0.05. 
The results also that shareholder rights, stakeholder roles, and disclosure and transparency had a significant negative effect on cost of debt.  Board responsibilities and general corporate governance mechanisms had a negative effect on cost of equity. Shareholder rights, equitable treatment of shareholders, role of stakeholders, disclosure and transparency, responsibilities of the board, and general corporate governance mechanisms had a negative effect on weighted average cost of capital. The results showed that the firms with higher corporate governance mechanism had a lower cost of capital. The results were consistent with the prior research. 
 
Published
Jun 22, 2017
How to Cite
ONGKLANG, Ailadda. An Empirical Investigation of Corporate Governance and Cost of Capital: The Case of Thai Listed Companies on the Stock Exchange of Thailand. Journal submission manual - ASEAN Journal of Management & Innovation, [S.l.], v. 4, n. 1, p. 110-122, june 2017. ISSN 2351-yyyz. Available at: <http://journal.stamford.edu/index.php/ajmi/article/view/683>. Date accessed: 24 oct. 2017.
Section
Articles