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Leverage and the Cost of Capital: Some Tests Using Nepalese Data

Journal of Nepalese Business Studies

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Field Value
 
Title Leverage and the Cost of Capital: Some Tests Using Nepalese Data
 
Creator Khadka, Hari Bahadur; Pokhara University
 
Subject Economics
cost of capital, capital structure
Financial Management
 
Description This paper is devoted to test the MM’s propositions about the relationship between leverage and cost of capital in the context of Nepalese capital markets. The main objective of the study is to determine whether the firms' overall cost of capital and cost of equity decline with the increasing use of leverage. The results showed a negative but insignificant beta value of the relationship between leverage and the overall cost of capital. Therefore the leverage may not be regarded as contributing variable to the cost of capital function for Nepalese firms. But finding contradicts with the traditional approach of the capital structure theories. It is further concluded that the cost of capital declines not only with leverage because of the tax deductibility feature of interest charge. The relationship between the cost of equity and leverage is also strongly negative. Besides leverage, the size, and D-P Ratio are other important variables that affect the cost of capital in Nepalese context.Journal of Nepalese Business Studies 2006/III/1 pp. 85-91
 
Publisher Faculty of Management Prithivi Narayan Campus
 
Contributor —
 
Date 2007-03-28
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
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Format application/pdf
 
Identifier https://www.nepjol.info/index.php/JNBS/article/view/485
10.3126/jnbs.v3i1.485
 
Source Journal of Nepalese Business Studies; Vol 3, No 1 (2006); 85-91
2350-8795
 
Language eng
 
Relation https://www.nepjol.info/index.php/JNBS/article/view/485/472
 
Coverage Nepal;
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