International Journal of Emerging Markets, Year (2022-12) , Pages (1-20)

Title : ( The relationship between corporate governance and cost of equity: evidence from the ISIS era in Iraq )

Authors: Mahdi Salehi , Mahdi Moradi , Saad Faysal ,

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Purpose – The cost of equity (COE) and corporate governance structure are the most critical factors affecting competition among publicly held companies. Accordingly, the present paper aims to examine the relationship between corporate governance and the COE in the wake of the Islamic State of Iraq and Syria (ISIS) in Iraq. Design/methodology/approach – Our statistical sample includes 34 companies listed on the Iraq Stock Exchange from 2012 to 2017. Board structure (i.e. board size, board independence, CEO tenure, board meetings frequency and CEO duality) and ownership structure (managerial ownership, institutional ownership and state ownership) are considered proxies for corporate governance structure. Besides, the authors employ the Capital Asset Pricing Model to measure the COE as our dependent variable. Multiple regression analysis and Exploratory Factor Analysis are also used to estimate the research models. Findings – Our results suggest that corporate governance structure plays a significant role in reducing COE during the ISIS era. Furthermore, the authors find that corporate governance can be an alternative to COE reduction in Iraq’s absence of national security. Our findings also indicate that board size, board meeting frequency, managerial ownership and institutional ownership are negatively associated with COE. Research limitations/implications – Although this study has been thoroughly considered and cautiously planned, the specific period chosen to conduct the research (i.e. the ISIS era) could be a significant limitation since financial disclosure of listed companies may have been of lower quality during this period. However, to relatively alleviate this limitation and maintain the authenticity of the findings, the authors exclude low-quality financial statements, particularly non-audited financial reports, from the statistical sample. Furthermore, practitioners of emerging markets that are suffering from a weak external corporate governance combination can use the findings of this paper as a guideline to compensate the existing market deficiencies by improving internal corporate governance for observing further cash sources with lower cost. The findings also propose to international agencies that the business environment in Iraq is heavily affected by the ISIS phenomenon and needs financial aid to recover from its side effects. Furthermore, macroeconomists may use this paper to make more decisive macroeconomic indicators predictions. Originality/value – This paper is among the pioneer investigations and elaborates on how the agency conflict is resolved effectively. The board and managerial characteristics and different forms of ownership might be applicable to provide cheaper funds for companies listed in emerging markets suffering from weak external corporate governance combinations.


, ISIS era, Agency problem, Corporate governance, Cost of equity capital
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author = {Salehi, Mahdi and Moradi, Mahdi and Saad Faysal},
title = {The relationship between corporate governance and cost of equity: evidence from the ISIS era in Iraq},
journal = {International Journal of Emerging Markets},
year = {2022},
month = {December},
issn = {1746-8809},
pages = {1--20},
numpages = {19},
keywords = {ISIS era; Agency problem; Corporate governance; Cost of equity capital},


%0 Journal Article
%T The relationship between corporate governance and cost of equity: evidence from the ISIS era in Iraq
%A Salehi, Mahdi
%A Moradi, Mahdi
%A Saad Faysal
%J International Journal of Emerging Markets
%@ 1746-8809
%D 2022