Political rights and equity pricing

Narjess Boubakri, Sadok El Ghoul, Walid Saffar

Research output: Journal article publicationJournal articleAcademic researchpeer-review

22 Citations (Scopus)


We examine the influence of political rights on the implied cost of equity capital using a sample of firms from 44 countries. We find that firms' equity financing costs are lower when political rights are stronger. We further find that political institutions' direct impact on the cost of equity capital is incremental to that of legal institutions. Economically, our results imply that a one standard deviation increase in political rights is associated with a 38 basis point decrease in corporate cost of equity capital. In additional analyses, we find that the effect of political rights on equity pricing is more pronounced in countries with weak legal institutions.
Original languageEnglish
Pages (from-to)326-344
Number of pages19
JournalJournal of Corporate Finance
Publication statusPublished - 1 Jan 2014


  • Cost of equity
  • Legal institutions
  • Political rights

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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