Many researches have been done for investigating of relations effective factors on optimum allocation resources. Doing of these researches are very important, with growing and developing of capital market in Iran. One of the main functions of capital market is providing of equity for companies that needs. Owners and creditors request proportional return with business risk of each firm and this return is cost of capital for firms. Stock market with providing of liquidity brings a decrease of cost of capital by price detection and ability of risk shift. In this paper we investigate relationship between stock market liquidity and cost of capital by using of Dividend Growth Model by Gordon and Capital Asset Pricing Model-CAPM as a comparison. The empirical analysis uses a panel data of 154 companies listed on the Tehran Stock Exchange from 1383 and 1388 by multiple regressions. The results show that there has been negative and significant relation between stock market liquidity and cost of capital on both of models and they are as same. In fact, a high liquidity brings a lower expected return from shareholders.
Karami G, Shafipoor M. Stock Market Liquidity and Cost of Capital:Comparison between Gordon and CAPM Models. 3 2011; 1 (2) :105-122 URL: http://mta.raja.ac.ir/article-1-42-en.html
