Measuring the cost of equity financing by using the CAPM، Gordan models and their impact on the financial decision An Empirical Study in a sample of companies listed in (S & P) index

Abstract

    The choice of capital structure is one of the important topics which took a wide space among specialists and researchers in the literature of financial management and this has created controversy philosophically significant about choosing the optimal capital structure and  using of the weighted average  cost of capital and its impact on Financing and investment decisions as a criterion to accept or reject the investment opportunities ، this controversy in the financial thought has created several models to measure the cost of equity  and therein lies the problem of the research ، which can be framed by multiplicity of measuring the cost of equity models and submit them to various cost to the company itself by the difference of the model used، which will be reflected on the weighted average of cost of capital ، which would affect the investor and therefore disrupt financial decision in the investment and financing،  and to achieve the goal of the study we select a sample of the constituent companies of the indicator (S&P) that is (20) companies for the period from (2005-2014)، The research reached a set of conclusions and recommendations، and most important is that the difference of cost of equity on the difference of the model used to measure it. This will leads to differences in weighted average cost of capital as well as differences of those costs for the same model by different measuring some variables that’s leading to different results، which leads to poor explanatory power of these models which is reflected on the investment decision.