THE EFFECT OF CORPORATE GOVERNANCE ON COST OF CAPITAL IN AGRICULTURE SECTOR OF ASIAN COUNTRIES

This study has determined connection of governance mechanisms with cost of capital based on Agency and Stewardship theories for companies in agriculture sector in 20 Asian countries from 2009-2018 for 363 agricultural firms as agriculture significantly contributes in growth of Asian economies. The WACC variable is selected as a dependent variable, whereas quality of corporate governance practices (QCG) variable has been used as independent variable. The endogeneity of QCG variable was examined through 2SLS model and results depict that variable of QCG significantly and negatively affect the variable of WACC. Moreover, the variables of leverage, ROA, sales growth and stock's volatility have significant positive connection with WACC, whereas, the firm size has significant negative relationship with the WACC. This research contributes to empirical literature by offering the first empirical support for analysis on association of governance systems and WACC for agricultural firms in Asian countries. These results are consistent with suggestions of Agency and stewardship theories and therefore, policy makers need to improve their corporate governance structures for attracting more investors and creditors around the world in agriculture sector.