This thesis investigates the relationship between specific-factors and the cost of equity capital in the Vietnam stock market. The approach applied by Pomerleano and Zhang (1991) has been used to estimate the cost of equity. The sample consists of 79 listed firms spread across both HoSE and HNX. For a period of three years, namely, 2009 to 2012 have been collected data to test the relationship between cost of equity capital and the level of firm-specific factors including market risk (BETA), the size of company (SIZE), Book to market ratio (BM), Debt to equity ratio (DE), Asset turnover ratio (ATO), Inventory to total assets (INV). Panel data and econometric testing model are implemented in the paper in order to get the most precise results. After running regressions, the final results show that BETA, SIZE, BM, ATO, INV are positive related to the cost of equity, while DE shows a negative association. Most coefficients confirm the expected relationship, documented by previous studies. For exception results between DE, SIZE and cost of equity, the paper explains basing on some unique characteristics of Vietnam market. Finally, some conclusions and recommendations for further research are made in order to capture some limitation of this paper as well as understand deeply these relationships accompanied by difference of Vietnam stock market.
