Economic policy uncertainty and cost of capital: the mediating effects of foreign equity portfolio flow

Frank Obenpong Kwabi; Samuel Owusu-Manu; Agyenim Boateng; Ernest-Bruno Ezeani; Min Du

doi:10.1007/s11156-022-01046-y

Economic policy uncertainty and cost of capital: the mediating effects of foreign equity portfolio flow

Frank Obenpong Kwabi^*, Samuel Owusu-Manu, Agyenim Boateng, Ernest-Bruno Ezeani, Min Du

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

16 Citations (Scopus)

Abstract

We investigate whether economic policy uncertainty and the interaction of foreign equity portfolio flow and economic policy uncertainty impact the cost of capital. Using panel data of 20 countries from 2001 to 2018, we find economic policy uncertainty to exert a positive effect on the cost of capital. However, the interaction between foreign equity portfolio flow and economic policy uncertainty has a negative effect on the cost of capital, demonstrating that, the combined effect of foreign equity portfolio flow and economic policy uncertainty has the opposite effect (i.e., reduces the cost of capital). Our results are robust to alternative specifications and endogeneity.

Original language	English
Pages (from-to)	457-481
Number of pages	25
Journal	Review of Quantitative Finance and Accounting
Volume	59
Issue number	2
Early online date	15 Mar 2022
DOIs	https://doi.org/10.1007/s11156-022-01046-y
Publication status	Published - Aug 2022

Keywords

Cost of capital
Cross country evidence
Economic policy uncertainty
Foreign equity portfolio flow

ASJC Scopus subject areas

Accounting
General Business,Management and Accounting
Finance

Access to Document

10.1007/s11156-022-01046-y

Cite this

@article{34d92d243d724db080ac228d538b4f43,

title = "Economic policy uncertainty and cost of capital: the mediating effects of foreign equity portfolio flow",

abstract = "We investigate whether economic policy uncertainty and the interaction of foreign equity portfolio flow and economic policy uncertainty impact the cost of capital. Using panel data of 20 countries from 2001 to 2018, we find economic policy uncertainty to exert a positive effect on the cost of capital. However, the interaction between foreign equity portfolio flow and economic policy uncertainty has a negative effect on the cost of capital, demonstrating that, the combined effect of foreign equity portfolio flow and economic policy uncertainty has the opposite effect (i.e., reduces the cost of capital). Our results are robust to alternative specifications and endogeneity.",

keywords = "Cost of capital, Cross country evidence, Economic policy uncertainty, Foreign equity portfolio flow",

author = "{Obenpong Kwabi}, Frank and Samuel Owusu-Manu and Agyenim Boateng and Ernest-Bruno Ezeani and Min Du",

note = "Publisher Copyright: {\textcopyright} 2022, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.",

year = "2022",

month = aug,

doi = "10.1007/s11156-022-01046-y",

language = "English",

volume = "59",

pages = "457--481",

journal = "Review of Quantitative Finance and Accounting",

issn = "0924-865X",

publisher = "Springer",

number = "2",

}

TY - JOUR

T1 - Economic policy uncertainty and cost of capital

T2 - the mediating effects of foreign equity portfolio flow

AU - Obenpong Kwabi, Frank

AU - Owusu-Manu, Samuel

AU - Boateng, Agyenim

AU - Ezeani, Ernest-Bruno

AU - Du, Min

PY - 2022/8

Y1 - 2022/8

N2 - We investigate whether economic policy uncertainty and the interaction of foreign equity portfolio flow and economic policy uncertainty impact the cost of capital. Using panel data of 20 countries from 2001 to 2018, we find economic policy uncertainty to exert a positive effect on the cost of capital. However, the interaction between foreign equity portfolio flow and economic policy uncertainty has a negative effect on the cost of capital, demonstrating that, the combined effect of foreign equity portfolio flow and economic policy uncertainty has the opposite effect (i.e., reduces the cost of capital). Our results are robust to alternative specifications and endogeneity.

AB - We investigate whether economic policy uncertainty and the interaction of foreign equity portfolio flow and economic policy uncertainty impact the cost of capital. Using panel data of 20 countries from 2001 to 2018, we find economic policy uncertainty to exert a positive effect on the cost of capital. However, the interaction between foreign equity portfolio flow and economic policy uncertainty has a negative effect on the cost of capital, demonstrating that, the combined effect of foreign equity portfolio flow and economic policy uncertainty has the opposite effect (i.e., reduces the cost of capital). Our results are robust to alternative specifications and endogeneity.

KW - Cost of capital

KW - Cross country evidence

KW - Economic policy uncertainty

KW - Foreign equity portfolio flow

UR - http://www.scopus.com/inward/record.url?scp=85126066782&partnerID=8YFLogxK

U2 - 10.1007/s11156-022-01046-y

DO - 10.1007/s11156-022-01046-y

M3 - Article

AN - SCOPUS:85126066782

SN - 0924-865X

VL - 59

SP - 457

EP - 481

JO - Review of Quantitative Finance and Accounting

JF - Review of Quantitative Finance and Accounting

IS - 2

ER -

Economic policy uncertainty and cost of capital: the mediating effects of foreign equity portfolio flow

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this