Corporate Inertia and Cost of Equity Capital

Document Type : Research Paper

Authors

1 Department of Accounting, Nour Branch, Islamic Azad University, Nour, Iran

2 Department of Accounting, Bandargaz Branch, Islamic Azad University, Bandargaz, Iran.

3 Assistant Professor of Accounting, University of Guilan, Rasht, Iran.

Abstract

Inertia appears in organizations in different forms, including suppression of valuable information in the organization, inflexible rules, excessive commitment to the organization, etc. Hence, the purpose of this study is to empirically analyze whether and how firms' inertia affects the cost of equity capital in Iranian emerging capital market. In the present study, we use meta-synthesis, Delphi analysis and finally questionnaire design to measure the corporate inertia. The mentioned questionnaire was sent to the managers of the sample companies, and finally 138 questionnaires were completed and returned and included in the statistical analysis. To measure cost of equity capital, we use three proxies including the O’Hanlon and Steele (2000) Model (OSM), CAPM and Industry-Adjusted Earnings-to-Stock Price Ratio (IndEP).The results show that corporate inertia has a positive and significant effect on cost of equity capital

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Interdisciplinary Journal of Management Studies (Formerly known as Iranian Journal of Management Studies)

Articles in Press, Accepted Manuscript
Available Online from 29 October 2023

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