Disclosure of Cybersecurity Investments and the Cost of Capital

The finance of cybersecurity: Quantitative modeling of investment decisions and net present value

Corporate Social Responsibility and the Cost of Capital: Evidence from Japanese Firms

Since the early 1990s, private capital flows have become an important source of funding for ‘emerging markets’. According to the International Finance Corporation (IFC), a sister institution of the...

ABSTRACT: Climate risk represents an increasingly vital issue to countries, companies, and institutional investors, making it a reality but not a distant threat to humanity. Considering the effects of climate risks on firms' financial indices and financing options, the study investigates whether climate risk is priced by the capital markets of South Africa. The study used reported carbon emissions as a measure of climate risk of 81 listed companies in the Johannesburg Stock Exchange from 2011 to 2020 to examine whether climate risk is considered and priced by the South Africa capital market. Data was sourced from DataStream database- a global financial and macroeconomic time-series database providing data on equities, stock market indices, currencies, company fundamentals, fixed income securities, and key economic indicators. We used the two-step system Generalized Method of Moments estimation technique that copes with endogeneity concerns to corroborate the effects of climate risk on cost of capital and capital structure. We find that climate risk is priced in both cost of debt capital and cost of equity capital. Specifically, we find that an increase in a firm's exposure to climate risk increases the cost associated with issuing debt and equity capital. We also find that climate risk exposure decreases the debt-equity ratio. Additionally, the study showed that firm size, leverage ratio, capitalization, profitability, and turnover affect both cost of capital and capital structure of listed firms. The study concludes that climate risk is priced in cost of financing in the capital market of South Africa. The study recommends that firms should invest in installing eco-friendly machinery that aligns with changing market expectations in order to reduce their carbon emissions. The study therefore highlights the need for companies to proactively assess and manage climate risks, incorporate climate considerations into their strategic decision-making, and enhance their resilience to climate-related challenges.

Cybersecurity Investments and the Cost of Capital

From 1993 to 2013, the institutional investors in China’s capital market have been booming. The types of investors have expanded dramatically, from solely public offering fund companies to more than 10 types of institution, such as the Social Security Fund, insurance asset management companies, assets managements under securities companies, trust companies and so on. At the end of 2012, the NPC Standing Committee adopted the revised Law of Investment Securities Fund in which they specially added the tenth chapter, Non-Public Offer Fund, bringing non-public offer funds under supervision. This is the first time the legal status of non-public offer fund was recognized. In June 2013, the Office of Central Institutional Organization Commission issued Notification of Assignment of Responsibility Regarding Private Equity Fund, which clarified that the private equity (PE) Fund is under the supervision of the CSRC (China Securities Regulatory Commission). As a result, they also have become institutional investors in capital markets under the governance of the CSRC. The growth of institutional investors in Chinese capital markets has had some difficulties. However, they are a force that cannot be ignored. The market value of their shareholdings has boosted, from five funds of CNY4 billion (less than 1 percent of the whole market value in 1998) to 10 percent at a valuation of CNY2.25 trillion now. This is tremendous progress. In the domestic capital market they function not only as a resources allocator, but also a value guide. However, because of its unique development history, the Chinese stock market’s investor structure of a high percentage of individual investors but a low percentage of institutional investors is very different when compared to a mature market.

Czech family businesses are currently experiencing their first changeover of generations in history. The first generation (founders or successors), two or more generations collectively operate in management and administrative authorities. This article aims to compare and evaluate preference for use of debt or equity financing in family businesses with the differing involvement of generations and the diversity of its allocation for the specific need of the company’s growth. This empirical study is performed based on a qualitative analysis of 245 family businesses. Hypotheses were confirmed using the Pearson correlation coefficient. This study confirms the dependence of equity and debt financing on the number of generations in management. This brings differing perspectives, opinions, and practices for financial management in the sense of a preference for debt or equity financing. The need for debt arises at the moment of compensating the transfer of ownership between generations. The analysis results indicate that family businesses managed by one generation prefer equity financing, companies managed by first and second generations prefer debt financing, and companies managed by second and third generations prefer equity financing. AcknowledgmentThe result was created in solving the project TA ČR ETA 2 (STA02018TL020) “Family businesses: Value drivers and value determination in the process of succession”, TL02000434. We are grateful also to representatives of enterprises who were willing to participate in this research.

Computer, Computer, on the Wall, Which Cost of Capital is Fairest, of Them All?

The purpose of this study is to examine the features of debt and equity funds in the Indian financial market, including their suitability, liquidity, tax implications, risk-return profiles, and other relevant factors. Through the purchase of fixed-income assets such as government bonds, corporate bonds, and money market instruments, debt funds look for investments that have low volatility and consistent returns. Equity funds, on the other hand, have a significant amount of their assets invested in equities, which can result in increased volatility but may also result in higher returns over the long term. According to the findings of the study, equity funds have the potential for bigger returns, while debt funds have a lower risk profile. This is the conclusion reached after comparing the two types of funds. Furthermore, the study investigates the tax consequences of both types of funds, which is crucial because taxes play a large influence in the decisions that are made regarding investments. Debt funds are subject to the short-term capital gains tax if they are kept for a period of time that is shorter than three years. The tax rate on long-term capital gains, on the other hand, is twenty percent, and indexation advantages are included. For equities funds that have been held for more than a year, the tax rate is 10% without indexation on profits that exceed ₹1 lakh. However, the tax rate for gains that are held for a shorter period of time is 15%. This study also investigates liquidity, which is another important factor to consider. Due to the greater liquidity of debt funds in comparison to individual fixed-income instruments, investors have more flexibility to withdraw their money from debt funds when they require it. This is because debt funds have better liquidity. It is possible for the underlying stocks of an equity fund to have an effect on the liquidity of the fund. In general, large-cap funds have superior liquidity than small-cap funds or sector-specific funds. In addition, the various investor profiles and the ways in which debt and equity funds are incorporated into their portfolios are discussed. Those who are retired, conservatives who are looking for returns with a reduced level of risk, or investors who have time horizons that range from short to medium are suitable candidates for debt funds. On the other hand, equity funds are more suitable for long-term investors who are willing to take on a greater degree of risk in the expectation of potentially bigger returns. Additionally, they are an excellent choice for individuals who are interested in riding the stock market's growth wave. Although debt and equity funds are complementary additions to any investor's portfolio, they perform distinct functions and have distinct risk-return profiles. Nevertheless, they are both beneficial to the investor. Prior to making decisions on investments, investors should do a comprehensive evaluation of their level of risk tolerance, investment horizon, and financial objectives. They ought to also give some thought to the possibility of diversifying their investments across a variety of asset classes. A comparative analysis like this one will prove to be a very useful resource for individuals who are considering making investments in India's financial markets. Keywords:- Debt funds, Equity funds, Risk-return profiles, Taxation, Liquidity, Investment suitability, Indian financial market.

In recent years, the Chinese capital market has been increasingly integrated into the international capital market, although the level of integration remains low. We exploit the unique variations in China’s capital market integration to study the effect of capital market internationalization on the cost of equity financing. Using firm-level panel data from China, we measure capital market integration at the corporate level using the degree of co-movement between a company’s share price and the international capital market. After controlling for year effects and industry effects, we find that the growing integration of the capital market is significantly increasing Chinese companies’ equity financing costs. This surprising result still holds after controlling for the endogeneity problem. One possible explanation is the asymmetric approach of China’s capital market internationalization, i.e. while the Chinese capital market is increasingly open to international investors, it remains difficult for Chinese investors to invest abroad. Consequently, while international investors bring more risk into the Chinese market, domestic investors in China lack effective ways to diversify the risk in the global market. This additional source of non-diversifiable risk demands a higher return to capital, which raises the equity financing costs in China.

[Main objectives] Corporate income tax systems usually discriminate between the different sources of finance: They favour debt over equity financing since interest costs are deductible for tax purposes whereas there is no equivalent relief for equity-financed investments. This unequal treatment might cause economic problems such as excessive leverage in the corporate sector and an associated increased vulnerability to economic crises, disadvantages for firms with restricted access to external funds and profit shifting incentives. To achieve an equal treatment of debt and equity financing, either an additional deduction for equity financing could be granted or the current deduction for interest expenses could be disallowed. A disallowance of interest expenses could be achieved by the interest deduction limitation rules which are already employed in several Member States. Other far-reaching, fundamental tax reforms to address the current debt bias are represented by the Comprehensive Business Income Tax (CBIT), Allowance for Corporate Equity (ACE), Allowance for Corporate Capital (ACC) and Cost of Capital Allowance (COCA). The present study provides an in-depth analysis of the effects of these different reform options on effective tax burdens in the EU28 Member States. Moreover, the study gives guidance to which extent current income tax rates at corporate and personal level would have to be adjusted for a revenue neutral implementation of fundamental tax reforms. On the basis of stylised model computations, this study informs about whether different fundamental tax reforms could, in principle, manage to address the debt bias and promote investment, possibly in a revenue neutral way. The main objectives of the study can be summarised as follows: * Analyse current interest deduction limitation rules in the EU28 Member States and assess the effect of interest deduction limitation rules on effective tax rates; * Provide insights on the effects of the fundamental tax reform options on current tax systems; * Consider a revenue-neutral implementation of the reforms and possible consequences for the level of investment in the EU28 Member States.

This article explores the risk and return performance of a company when practicing equity and debt financing. Monte Carlo simulation is used to reflect 10 years of quarterly returns for a company when choosing either debt or equity financing. For simulation purposes, the average risk and return indicators have been benchmarked to the profitability of Nestle Malaysia Bhd. Given the various scenarios simulated, the result highlights equity financing's ability to reduce credit risk exposure when returns are tied to company performance – an essential measure considering that debt caused the global economic collapse of 2007/2008 and that risk sharing in an equity financing system could help curb credit risk exposure. A Monte Carlo simulation with 5000 iterations shows that equity financing creates zero credit risk exposure even for companies with low profitability. For those seeking to promote long-term sustainability despite financial shocks, equity financing can thus be a viable alternative approach to financing – yet despite its ability to reduce credit risk exposure, it remains a less favoured method. This research suggests that a clear explanation of equity financing could be used to interest investors and companies in this approach to financing.

Cost of capital is one of the key factors of accounting regulation policy for telecommunication market. This paper aims at investigating efficient policy improvements concerning accounting regulation for telecommunication market focused on cost of capital calculation methods and its application. At First, cost of capital estimating method should be improved. In estimating the cost of equity capital, it is necessary to use benchmark method for Equity risk premium. It will reduce analytical errors caused by a rapid economic change and inflation. It is also more desirable to use debt premium adding method for the cost of debt capital. Optimal capital structure method may be considered a better way to estimates capital structure. Secondly, cost of capital estimating process also has to be reformed. Telecommunication industry changes rapidly so it does not reflect fast environmental changes. Therefore, cost of capital should be calculated every year. Cost of capital should be calculated by individual companies. There is information asymmetry between regulators and regulatees. Because of that cost of capital calculating process takes long time and cost a lot. To solve this problem, regulator should legislate on cost of capital calculation and then regulating companies report the calculating result. Lastly, major telecommunication companies are all listed now and it is possible to calculating it separately. We must continuously improve the estimating method and application of cost of capital and due to the fast growing of telecommunication industry. The process of determining the calculating method must be discussed and best method chosen.

How environmental regulation imperatives introduce innovation in firm financing choice among selected asian economies

This study examines the impact of related party transactions (RPTs) on the cost of capital among KOSPI and KOSDAQ-listed firms in South Korea. Using 14,277 firm-year observations from 2012 to 2020, we employ multivariate regression analysis to examine the relationship between RPT intensity and the weighted average cost of capital (WACC). We find a robust and positive association between RPT intensity and WACC, suggesting that capital markets perceive extensive intra-group transactions as a governance risk and a source of increased information asymmetry. This perception leads to a higher rate of returns by investors, thereby increasing the cost of both equity and debt financing. Our findings contribute to the literature on corporate governance and capital market efficiency by highlighting the role of RPTs as a key determinant of financing costs. These insights underscore the importance of implementing stronger disclosure requirements and enhancing monitoring mechanisms to mitigate potential agency problems arising from intra-group transactions in emerging markets.