Cost of equity capital - measurement dilemmas

The study applies the approach of transaction cost theory to analyse the nature of equity capital. Empirical tests were conducted among agricultural entrepreneurs, followed by the construction of binary models, in order to verify the research hypothesis that cost of equity capital is zero. The practitioners in this field do not share a common view on the need to estimate the cost and the level of equity capital. It has been concluded that the cost of equity capital should be approached as a transaction cost stemming from the rarity of the benefit of the equity capital and as a more efficiently used resource, involving, as a consequence, the application of the original function of ownership rights