Corporate governance and cost of equity: the moderating role of ownership concentration levels

Muhammad Arsalan Hashmi, Urooj Istaqlal, Rayenda Khresna Brahmana

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)
150 Downloads (Pure)


Purpose: The study analyzes the influence of corporate governance and ownership concentration levels on the cost of equity. Further, the authors extend the literature by investigating the moderating effect of ownership concentration levels (i.e. at 5%, 10% and 20%) on the relationship between corporate governance and the cost of equity. Design/methodology/approach: The study applies several robust panel regression techniques to a sample of 114 active non-financial companies listed on the Pakistan Stock Exchange from 2011 to 2016. Corporate governance was measured through a unique index comprising 30 governance attributes. The cost of equity was measured through the capital asset pricing model. Further, the authors construct three variables for ownership concentration levels, i.e. at 5%, 10% and 20%. To address the endogeneity problem, the one-lagged variable model and GMM approaches were also applied. Findings: The results indicate that better corporate governance reduces the cost of equity, while ownership concentration at high thresholds would increase the cost of equity. Further, the authors find that ownership concentration at the 20% threshold moderates the relationship between corporate governance and the cost of equity. Thus, the authors argue that firms can minimize the risk faced by shareholders by implementing substantive corporate governance mechanisms. In addition, effective corporate governance mechanisms at high ownership concentration levels are imperative for managing the cost of equity. Originality/value: The study reports novel evidence that ownership concentration at a high threshold moderates the effect of corporate governance on the cost of equity.

Original languageEnglish
Pages (from-to)(In-Press)
Number of pages21
JournalSouth Asian Journal of Business Studies
Early online date7 Feb 2023
Publication statusE-pub ahead of print - 7 Feb 2023

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This document is the author’s post-print version, incorporating any revisions agreed during the peer-review process. Some differences between the published version and this version may remain and you are advised to consult the published version if you wish to cite from it.

© 2023, Emerald Publishing Limited.


  • Corporate governance
  • Cost of equity
  • Ownership concentration
  • Pakistan

ASJC Scopus subject areas

  • Business and International Management
  • Cultural Studies
  • Geography, Planning and Development
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Marketing


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