Organization Capital and the Cost of Equity Financing in Medium‐Sized Manufacturing Firms1. (12th December 2017)

• Record Type: Journal Article
• Authors: Attig, Najah; El Ghoul, Sadok
• Is Part Of: Contemporary accounting research. Volume 35:Number 3(2018)
• Page Start: 1616
• Page End: 1644
• Publication Date: 2017-12-12
• Subjects: Accounting -- Research -- Periodicals; Accounting -- Canada -- Periodicals; 657
• DOI: 10.1111/1911-3846.12329
• Languages: English
• ISSNs: 0823-9150

Abstract

Abstract: We examine the effects of organization capital—evident in management quality practices—on firms' implied cost of equity. We show that superior management practices decrease firms' cost of equity capital. This novel finding, robust to a battery of sensitivity analyses and to endogeneity bias, highlights the importance of superior management practices in improving firms' financing conditions. In sum, this study demonstrates that the quality of management practices maps onto firms' financing conditions, stressing the value relevance of intangible assets.