Research Article

Management International Review

, Volume 53, Issue 6, pp 899-916

First online:

National Culture and International Differences in the Cost of Equity Capital

  • Sidney John GrayAffiliated withUniversity of Sydney Business School, University of Sydney Email author 
  • , Tony KangAffiliated withSpears School of Business Oklahoma State University
  • , Yong Keun YooAffiliated withKorea University Business School

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  • Prior literature suggests that national culture influences many facets of business operations including corporate governance, capital structure, managerial compensation, foreign direct investment behavior and accounting systems.

  • Extending this line of literature, we examine whether key aspects of national culture are also related to international differences in the cost of equity capital.

  • In a cross-country sample of 32 countries during 1992–2006, we find that the cost of equity capital tends to be higher in more individualistic and less uncertainty avoiding societies consistent with their greater risk-taking orientation.

  • This finding contributes to the international business and financial literature by identifying national culture as an important institutional variable influencing firms’ cost of equity capital around the world.


National culture Cost of equity capital Individualism Uncertainty avoidance Risk-taking