This study analyzes the effect of individual firms' international diversification on the cost of equity capital for Korean companies. From an ex ante perspective, firms may reduce the volatility of their overall cash flows by expanding operations across diverse countries, thereby offsetting the variability of cash flows from individual countries, or they may lower their cost of equity by effectively diversifying unsystematic risk through investments in multiple countries. However, conducting business operations in various countries may also increase the cost of equity if firms bear additional risks arising from exchange rate fluctuations or political instability in those countries, or if they incur higher agency costs in managing overseas subsidiary managers. Using a sample of 755 firm-year observations from companies listed on the Korea Stock Exchange (KSE) and KOSDAQ markets from 2000 to 2005, the empirical analysis reveals that as the level of international diversification—measured by the ratio of foreign sales and the ratio of foreign assets—increases, the ex ante cost of equity capital derived from a firm valuation model increases significantly. In other words, for Korean firms, pursuing diversification across multiple countries increases overall firm risk, leading to a rise in the cost of equity capital. These empirical findings may provide an additional contribution to understanding the effects of international diversification strategies, which have been actively pursued by Korean firms in recent years, on the firms involved.