• A
  • A
  • A
  • ABC
  • ABC
  • ABC
  • А
  • А
  • А
  • А
  • А
Regular version of the site

Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Yuliya Gareeva
The influence of financial leverage on the cost of equity at emerging markets
Bachelor’s programme
2014
This paper is dedicated to the determination of relation between the cost of equity and financial leverage in emerging markets – South Africa and Russia. The urgency of this investigation is confirmed by the importance of companies return assessment by investors. What is more, the inclusion of the financial leverage into the model throws the light on the question connected with company’s capital structure. The non-availability of an unified approach for the cost of equity determination in the emerging markets makes it difficult for economic agents to decide on the potential investment. Finally, ambiguous results of investigations about the connection between the cost of equity and financial leverage in the developed markets make this analysis important for consideration. The novelty of this paper is connected with the inclusion of additional factor, characterizing the premium for financial leverage in the emerging markets. What is more, the improvement of Fama and French model is undertaken. The period of observation is from 2004 to 2013 for companies operating in South Africa and from 2007 to 2013 for companies operating in Russia. The investigation was conducted with Fama and French model. The dynamic part which is shifting window of testing is included in the model. The investigation depicts the existence of positive relation between the cost of equity and financial leverage in emerging markets. This relation can be explained by additional risks related to companies with a high level of financial leverage. These risks are closely connected with the default probability of such companies that is especially important during economic downturns. What is more, companies with a high level of financial leverage are more financially constrained to finance long term profitable investment projects. That is why investors require a higher level of return on shares of these companies.

Student Theses at HSE must be completed in accordance with the University Rules and regulations specified by each educational programme.

Summaries of all theses must be published and made freely available on the HSE website.

The full text of a thesis can be published in open access on the HSE website only if the authoring student (copyright holder) agrees, or, if the thesis was written by a team of students, if all the co-authors (copyright holders) agree. After a thesis is published on the HSE website, it obtains the status of an online publication.

Student theses are objects of copyright and their use is subject to limitations in accordance with the Russian Federation’s law on intellectual property.

In the event that a thesis is quoted or otherwise used, reference to the author’s name and the source of quotation is required.

Search all student theses