Systematic risk and determinants of cost of capital: An empirical analysis of selected case studies

• Published in: Journal of Security and Sustainability Issues
• Main Author: Hussain H.I.; Herman; Ghani E.K.; Razimi M.S.A.
• Format: Article
• Language: English
• Published: General Jonas Zemaitis Military Academy of Lithuania 2019
• Online Access: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85073007663&doi=10.9770%2fjssi.2019.9.1%2822%29&partnerID=40&md5=75709e0827dc5d179712ae53972b1083

The objective of this study is to examine the effect of business size, market value of equity, required rate of return, systematic risk, debt ratio and total debt along with inflation on cost of capital for selected firms in five states of ASEAN region. Secondary data is collected during the time of 2000-2017 for ten firms in each country. Findings through regression analysis indicates the fact that significant determinant for fixed payment ratio is required rate of return, size, market to book ratio, systematic risk, and inflation are significant determinant. For interest covered ratio, key determinants are required return, total debt, and market to book ratio, size, and inflation. For dividend payment, size, debt ratio, inflation, and market value of equity. For interest payment, systematic risk, inflation, log market value of equity, size and market to book ratio are found to be significant determinant. These findings are providing a new insight in the literature of finance and financial management. Both theoretical and practical significance of the study can be viewed through provision of literature discussion and empirical findings. Policy makers, financial analysts, and other industry experts can utilize these findings as a meaningful source for strategic decision. However, future studies can be reconsidered remaining countries in ASEAN region and better sample size of the firms. © 2019, General Jonas Zemaitis Military Academy of Lithuania.