Does reporting on involvement in poverty alleviation affect the cost of equity? - Empirical evidence based on listed companies in Sweden

Abstract

The aim of this thesis is to conclude whether there is a difference in the effect on the cost of equity between companies involved in targeted poverty alleviation and companies that are not involved. Previous research indicates that increased transparency and sustainability reporting have a positive effect on the cost of equity and therefore this study aims to add research in this area. The companies included are of varying size and selected from the Stockholm Stock Exchange since very few, if any, research in this area has been made on the Swedish market. Data for the companies is collected from Yahoo Finance from the period 2015 - 2019 and were then analyzed. To calculate the cost of equity the Fama and French three factor model is used, and the sample is divided into two subsamples to evaluate the difference between the two groups. The empirical results made in this paper shows that there is a difference in the effect on the cost of equity between the two subsamples and it also indicates that companies being involved in poverty alleviation lowers their cost of equity by almost twice as much compared to the companies not involved in poverty alleviation.