Empirical Evidence for Models to Estimate the Cost of Equity Capital

• Autor(a) principal: Martins, Eliseu
• Data de Publicação: 2006
• Outros Autores: Galdi, Fernando Caio, Lima, Gerlando Augusto Sampaio Franco de, Necyk, George Anthony, Abe, Cesar Henrique Shogi
• Tipo de documento: Artigo
• Idioma: eng; por
• Título da fonte: BBR. Brazilian Business Review (English edition. Online)
• Texto Completo: http://www.bbronline.com.br/index.php/bbr/article/view/427
• topic: company valuation; cost of equity capital; difference of means test; avaliação de empresas; custo de capital próprio; teste de médias

This article investigates whether there are statistically significant differences among the costs of equity capital of Brazilian companies estimated by four models and their variants: Gordon, CAPM, APM and Ohlson-Juettner. We used a cross-section of 34 companies that were part of the São Paulo Stock Exchange Index (IBOVESPA) on December 29, 2005. The results do not permit saying that the choice of model makes no difference in estimating the cost of equity capital, so the methodology hypothesis was rejected. The models based on profit and dividend projections, notably the OJ and Gordon models, resulted in equivalent mean values and also were those that most resemble each other. The OJ model appears to be theoretically superior to the Gordon and Gordon & Gordon models, given that it was developed with fewer premises and in a more analytic manner.