The Impact of R&D Investments on The Cost of Equity of Company

This paper investigate the influence of relative capital as a component of intellectual capital on the cost of equity. The relevance of this work lays on the fact that the existence of relational capital is not disclosure in financial statements, and more than that, the economic effect of such component of intellectual capital is hard to forecast. More than that, due to lack in the the investigations of the influence of relational capital on the cost of equity are usually conducted on companies of the developed market (mostly on American market). On the one hand, studies indicate that there is no consensus on the impact of relational capital on the cost of equity. On the other hand, the lack of researches in emerging markets is due to the limited proxy indicators of relational capital (the national rating of companies, the brand value of the company, its reputation). Thus, the study of emerging market companies remains relevance. Empirical testing of the dependence of the cost of equity on the relative capital was carried out within the framework of the three-factor model of Fama and French with the addition of a factor of relative capital. It was found that a high level of relative capital in a company operating in the developing market decreases the company's risk in the eyes of the investor, which leads to an decrease in capital costs.