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Title: Ownership structure and cost of equity capital: Tunisian evidence

Authors: Mejda Dakhlaoui; Marjène Rabah Gana

Addresses: Department of Financial Sciences, Community College, Imam Abdulrahman Bin Faisal University, P.O. Box 1982, Dammam, Saudi Arabia ' Department of Economics and Management, Polytechnic School, University of Carthage, P.O. Box 77, Amilcar, Tunis, Tunisia

Abstract: This paper aims to examine the effect of ownership structure on the cost of equity capital in the Tunisian context. Using panel data, the study provides evidence for a negative relationship between ownership concentration and cost of equity capital. However, most ownership composition variables validate the entrenchment effect. Results show an inverted U-shaped relationship between institutional ownership, foreign ownership and cost of equity capital. However, a U-shaped relationship is found between state ownership and the dependent variable. To alleviate endogeneity concerns and establish that the results are robust, the authors re-estimated the regressions using a dynamic approach. It supports the entrenchment effect of ownership concentration. A U-shaped relationship between this variable and the cost of equity capital is confirmed. However, a concave relationship is found when considering ownership composition variables. As for family ownership, the results from static and dynamic approaches are convergent and in favour of entrenchment effects.

Keywords: corporate governance; ownership structure; cost of equity capital; nonlinear effects; dynamic panel GMM estimator.

DOI: 10.1504/IJBGE.2020.104702

International Journal of Business Governance and Ethics, 2020 Vol.14 No.1, pp.96 - 121

Accepted: 22 May 2019
Published online: 27 Jan 2020 *

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