The Relationship between Ownership Structures and Cost of Equity of Thai Listed Companies on the Stock Exchange of Thailand

Abstract

             The objectives of this study are to 1. Examine the relationship between ownership structure and cost of equity capital and 2. to compare between the cost of equity capital of family firms and non-family firms that listed in the Stock Exchange of Thailand.  Independent variables namely; family ownership, managerial ownership, institutional ownership, government ownership and foreign ownership are used in this study. Also, cost of equity capital which measured from CAPM model is used as dependent variable.  Furthermore, firm size, return on asset ratio are applied as control variables in this study.

               The results of this study reveal that family ownership is negatively associated with cost of equity capital.  This result suggests that family shareholders have a strong power to influence company.  This is because shareholders that come from the same family are likely to work as a team in order to enhance firm performance and have a better monitoring function which consequently reduce cost of equity capital of the firms.  This study also find that government ownership is also negatively associated with cost of equity capital.  This result suggests that investor trust government and their monitoring process which reducing in cost of equity capital.  Apart from these there is no relationship between managerial ownership, institutional ownership and foreign ownership and cost of equity capital.