Corporate reputation, cost of capital and the moderating role of economic development: international evidence

Muhammad Nurul Houqe, Habib Khan, Olayinka Moses, Arun Elius

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


The purpose of the study is to examine the impact of corporate reputation (hereafter CR) and the degree of economic development on firms’ cost of capital remains unresolved. This study addresses these issues.

Using a global sample across 20 countries, the study investigates the discrete and joint effects of CR and jurisdictional economic development on the cost of equity (COE) and cost of debt (COD) capital. The analysis encompasses a dual data set, comprising 1,308 observations for COE and 1,223 observations for COD, allowing for a comprehensive exploration of these dynamics.

The findings indicate that CR leads to a reduction in the cost of capital for reputable firms. Nevertheless, the extent of this decrease varies per type of capital and firm’s reputation level and is contingent upon the economic development level within the firm’s jurisdiction. Particularly noteworthy is the moderating effect of economic development on CR, which shows that COE capital tends to be lower for reputable firms operating in economically developed jurisdictions. Albeit, this is not the case for COD capital for reputable firms in similarly developed jurisdictions.

Practical implications
This study illustrates that effective CR management, aimed at reducing the cost of capital, necessitates a combination of the firm’s unique competitive advantage and the economic development context of its jurisdiction to truly achieve its intended goal.
To the best of the authors’ knowledge, this is the first global study to explore the impact of CR on both COE and COD capital. Furthermore, this study is primarily towards understanding the moderating role of economic development in the relationship between CR and cost of capital.
Original languageEnglish
Pages (from-to)1-29
Number of pages29
JournalMeditari Accountancy Research
Publication statusPublished - 7 Jan 2024


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