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Article
SHOULD COMPANIES BE AFRAID OF EXPENSIVE EQUITY IN CENTRAL AND EASTERN EUROPE?
Radoslaw Kurach, Tomasz Slonski
ABSTRACT. Equity markets of Central and Eastern Europe (CEE) have been traditionally perceived as more risky, hence offering more costly capital with respect to mature exchanges. However, during the last decade due to the European integration process we have observed accelerated development of these emerging markets in terms of their sophistication and depth. These circumstances motivated us to set the cost of capital divergence within three European Union as the research objective. The scientific novelty of this paper relies on the use of the unique sample of 11 companies' shares cross-listed mainly between CEE and mature European markets in the period from 2010 to 2014. We apply the cointegration methodology to provide evidence that country-level equity valuation premium has become outdated .
KEYWORDS: Central and Eastern European countries, emerging markets, cross-listing, cointegration.
JEL classification: F36, F65, G12, G15, G32.