Analysing the Impact of Cost of Capital on Business Growth

Insights From Firms Listed on Frankfurt Stock Exchange

Bibliographic Data

ID21571001
AuthorsHalkawt Ismail Mohammed Amin (0000-0001-9275-6005, Department of Accounting Dukan Technical Institute Sulaimani Polytechnic University Sulaimani Iraq), Richard Arhinful (0000-0002-6327-4231, Centre for Accounting Finance and Economics Multimedia University Selangor Cyberjaya Malaysia, corresponding author), Hayford Asare Obeng (0009-0005-8678-4903, Business Administration Department World Peace University Nicosia Turkish Republic of Northern Cyprus), Leviticus Mensah (0000-0001-5937-1234, Accounting and Finance Department World Peace University Nicosia Turkish Republic of Northern Cyprus), Bright Akwesi Gyamfi (Centre for Accounting Finance and Economics Multimedia University Selangor Cyberjaya Malaysia, corresponding author)
Year2026
Volume43
Issue1
Publication date2026-03-01
Open AccessYes
TypeARTICLE
VenueCanadian Journal of Administrative Sciences / Revue Canadienne des Sciences de l Administration (JOURNAL)
Journal identifiersISSN: 0825-0383 • E-ISSN: 1936-4490
PublisherWiley (PUBLISHER • GB)
DOI10.1002/cjas.70044
OpenAlexW7125135150
LanguageEN
Citations received2
References cited92

Cost of capital plays a critical role in shaping business growth, influencing firms' investment decisions, financing strategies and overall market performance. The study applied the capital asset pricing model (CAPM) theory to examine the influence of the cost of capital on business growth. This research used data from 227 nonfinancial entities listed on the Frankfurt Stock Exchange between 2005 and 2022 from Thomson Reuter Eikon DataStream. The study employed three estimation methods: the Common Shock Autoregressive Distributed Lag (CS‐ARDL), Common Correlated Effects Mean Group (CCEMG) and a two‐step difference generalized method of moments (GMM) to analyse the impact of the cost of capital on revenue, assets and income growth. The weighted average cost of capital (WACC) was found to have a positive and significant effect on income and asset growth in both short‐ and long‐run periods. In contrast, a positive and significant impact on sales growth was observed in both the short‐ and long‐run periods. The moderating relationship between WACC and market size had both a short‐ and long‐run positive and significant effect on income and revenue growth. In contrast, a negative and significant impact on asset growth was observed in both the short‐ and long‐run periods. The results suggest that financing costs and market size jointly influence firm growth, underscoring the importance of efficient capital management and strategic market expansion to enhance investor confidence and valuation

Capital market · Cost of capital · Revenue · Stock exchange · Stock market · Weighted average cost of capital · Firm Innovation and Growth · Impact of AI and Big Data on Business and Society · Working Capital and Financial Performance

Tools

Open DOI