TY  - JOUR
AU  - Stulz,Rene M.
TI  - Globalization of Equity Markets and the Cost of Capital
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7021
PY  - 1999
Y2  - March 1999
UR  - http://www.nber.org/papers/w7021
L1  - http://www.nber.org/papers/w7021.pdf
N1  - Author contact info:
Rene M. Stulz
The Ohio State University
Fisher College of Business
806A Fisher Hall
Columbus, OH 43210-1144
Tel: 614/292-1970
Fax: 614/292-2359
E-Mail: stulz_1@cob.osu.edu
AB  - This paper examines the impact of globalization on the cost of equity capital.  We argue that the cost of equity capital decreases because of globalization for two important reasons. First, the expected return that investors require to invest in equity to compensate them for the risk they bear generally falls. Second, the agency costs which make it harder and more expensive for firms to raise funds become less important.  The existing empirical evidence is consistent with the theoretical prediction that globalization decreases the cost of capital, but the documented effects are lower than theory leads us to expect.  We discuss various reasons for why this is the case.
ER  -