Foreign shocks and international cost of equity destabilization. Evidence from the MENA region

Alexis Guyot (1) , Thomas Lagoarde-Segot (2, 3) , Simon Neaime

1 Audencia Recherche
2 DEFI - Centre de recherche en développement économique et finance internationale
3 Euromed Marseille - École de management

This paper investigates whether foreign financial shocks can destabilize the cost of equity in emerging markets. After a theoretical discussion, we develop annual metrics for the international cost of equity, financial integration, spillovers and shift-contagion vulnerability in a sample of 535 Middle East and North African firms from Egypt, Tunisia, Morocco and Jordan over the 1998-2011 period. We then analyze the impact of foreign shocks on the international cost of equity, using a set of SGMM and PVAR models. Our results indicate that external shocks can increase the cost of equity in mature emerging markets.

Keywords: Financial crises; Development; MENA region

Domains: Humanities and Social Sciences; Economics and Finance

Alexis Guyot, Thomas Lagoarde-Segot, Simon Neaime. Foreign shocks and international cost of equity destabilization. Evidence from the MENA region. Emerging Markets Review, 2014, 18, pp.101-122. ⟨10.1016/j.ememar.2014.01.003⟩. ⟨hal-00841198⟩