Polytechnic University of Valencia Congress, 1st International Conference on Business Management

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The impact of the economic crisis on the cost of capital. Evidences from Spain
Ana Blasco, David Postiguillo, Javier Ribal

Last modified: 26-08-2015

Abstract


The economic crisis has caused an upheaval in the financial markets which had affected all the parameters involved in fixing the cost of capital. This study aims to determine how these changes in markets have influenced the WACC of two different Spanish industries. On the one hand a stable and steady industry as the food industry with a low income elasticity of demand. On the other hand the homebuilding industry, this industry had a huge growth before the crisis, almost a bubble, and has suffered the aftermath in a very marked way. The evolution of the cost of capital in the 1998-2013 period shows that the cost of capital of the food sector is very stable whatever the model used whereas the cost of capital of the homebuilding industry suffered a sharp decline.

DOI: http://dx.doi.org/10.4995/ICBM.2015.1346


Keywords


WACC; cost of equity; cost of debt; risk-free rate; market risk; CAPM; return on equity; homebuilding industry; food processing industry; SMEs; betas; leverage

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