—The objective of this research is to examine the degree of correlation between the cost of capital from a side and shares market prices and their book values at Kuwait Stock Exchange from the other side. The notion here is that correlation of some sort is transpiring which could affect published financial information and decision making at large. The basic equity valuation model used in the study is the one developed originally by Ohlson (1995), which relates the firm’s equity market value to its book value adjusted for abnormal earnings. A sample of Kuwaiti firms listed on Kuwait stock exchange is used for testing this presumption for the period between 2005 and 2011. The results showed a negative correlation between the cost of capital versus companies' book value on one side, and the cost of capital versus companies' market value on the other side.
—Book value, market value, market capitalization, cost of capital, Kuwait stock exchange (KSE), capital asset pricing model (CAPM).
Mohamad H. Atyeh is with the Australian College of Kuwait (ACK), Kuwait (e-mail: email@example.com).
Cite: Mohamad H. Atyeh and Wael Al-Rashed, "Correlation among Cost of Capital, Book Values and Shares Prices: The Case of Kuwait Listed Companies," Journal of Economics, Business and Management vol. 3, no. 1, pp. 136-139, 2015.