Prior studies argue that information costs firm's capital due to the information asymmetry, and most of those research papers investigated develop countries. Malaysia, as an emerging market, offers its unique characteristic in terms of financial reporting regulation and is hugely influence by export-oriented firms. Therefore, this research aims to investigate whether information disclosure may affect the cost of equity of firms. We investigate this hypothesis by using all Malaysian listed firms excluding the finance, services, and utilities companies over 3 years period of 2010-2012. We use robust panel regression where the values are based on White robust standard errors that control for heterocedasticity errors. Overall, our findings are consistent with previous research that higher level of disclosure might discount the firm's cost of equity, suggesting that firms should disclose more information for better cost of capital. At the end of our research, we explain our findings using two perspectives which are: information cost and agency cost.
In today s changing business environment, the on going debate is between proponents and opponents of greater disclosure. The Asian financial crisis in 1997 further led to a wider recognition of the importance of quality corporate disclosure. However the benefits of greater disclosure are not well established and have proven difficult to quantify. This study attempts to examine the association between corporate disclosure score and cost of equity capital. While majority ofprior research in this discipline concentrated on the US and UK securities, this paper provides Malaysian evidence on this issue. Contrary to other research findings the results indicate that there is no significant relationship between the disclosure score and cost of equity which could be due to the loss of timeliness of information. As for the disclosure score, all companies showed an improvement over the years indicating the awareness for disclosure. NACRA companies showed good improvement on disclosure score as compared to the Industrial Products companies.
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