The Influence of the Structure Capital as a Component of Intellectual Capital on the Cost of Equity

The problem of determination of cost of equity for the company is one of the main question of corporate finance. There is several risk factors influencing required return and, hence – discount rate and company value. The rising importance of intellectual capital in knowledge economy rises the question, whether IC and its components influence cost of equity. In this work, the influence of structural capital and its important part, innovation capital on the cost of equity, was tested for the emerging market of Russia and India and mature market of the USA. The study was conducted for portfolios for the time period of 1997-2015 for USA, 1998-2015 for India and 2007-2015 for Russia with the application of Fama-French three-factor model with the additional factor of innovation capital. The dynamic component of the research was in the applying Fama-McBeth procedure of the rolling regression with the 3-year windows with 1-month movement. For all three markets the negative premiums for low level of innovation capital were obtained: the cost of equity were higher for companies with high level of innovation capital, the risk was assumed to be higher due to high uncertainty of innovation activity and its results.