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- Title
THE COST OF CAPITAL AND THE MARKET POWER OF FIRMS: REPLY AND CORRECTION.
- Authors
Sullivan, Timothy G.
- Abstract
The article focuses on a comment on the study "The Cost of Capital and the Market Power of Firms," by Timothy G. Sullivan published in the May 1978 issue of the journal Review of Economics and Statistics. The study discussed the relationship between market structure and the cost of equity capital and the size, concentration, durable/non-durable and growth characteristics of firms. The study concluded that beta, the measure of systematic risk and therefore capital costs, in general appears to be lower for firms that are large and for firms that sell in highly concentrated markets. In the comment, the authors found different results for a different sample of firms, and were puzzled by the size and growth coefficients reported in the original paper. The authors state the relationship between size and beta was expected to be negative on the assumption that investors associate increased size with increased diversification, and reduced variability, in the product markets. This assumption is rejected in the article.
- Subjects
CAPITAL costs; BUSINESS enterprises; BUSINESS; REVIEW of Economics &; Statistics (Periodical); INDUSTRIAL organization (Economic theory); SULLIVAN, Timothy G.; BETA (Finance); PLANNING; INVESTMENT analysis; RISK assessment; BUSINESS size
- Publication
Review of Economics & Statistics, 1982, Vol 64, Issue 3, p523
- ISSN
0034-6535
- Publication type
Article
- DOI
10.2307/1925955