Table 5

Corporate integrity culture and the implied cost of equity capital: cross-sectional analysis

Trust indexReligiosity
LowHighLowHigh
(1)(2)(3)(4)
Corporate Integrity−0.061**−0.038−0.067**−0.031
(−2.059)(−1.232)(−2.227)(−1.015)
Beta Value-Weighted0.091*0.0730.164***0.011
(1.710)(1.497)(2.959)(0.238)
Idiosyncratic Risk1.278***0.3041.014***0.627***
(5.628)(1.439)(4.504)(2.878)
Market Value of Equity−0.434***−0.357***−0.318***−0.466***
(−5.579)(−5.163)(−4.064)(−6.861)
Market-to-Book−0.026***−0.034***−0.032***−0.030***
(−3.066)(−4.020)(−3.882)(−3.403)
Book Leverage1.376***2.013***1.442***1.941***
(4.141)(7.045)(4.348)(6.756)
Momentum−0.361***−0.258***−0.420***−0.215***
(−5.595)(−4.216)(−6.400)(−3.630)
Analyst Forecast Dispersion−0.1110.008−0.1620.033
(−0.953)(0.076)(−1.303)(0.341)
Long-Term Growth Rate2.059***1.376***2.496***0.948***
(5.194)(3.502)(5.937)(2.625)
Return on Assets−1.670***−1.497***−1.854***−1.362***
(−3.126)(−3.006)(−3.181)(−2.967)
Year Fixed EffectsYesYesYesYes
Firm Fixed EffectsYesYesYesYes
Observations9,0998,8118,8549,056
Adjusted R20.6140.6460.6180.641

Note(s): The table presents the relation between corporate integrity culture and the implied cost of equity capital. The dependent variable is the implied cost of equity capital. The independent variable of interest is Corporate Integrity. Other variables are defined in Appendix A. The regressions also include year fixed effects and firm fixed effects. t-statistics is based on standard errors adjusted for heteroscedasticity and clustered at the firm level. *, ** and *** denote significance at the 10%, 5% and 1% levels, respectively

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