Disclosure and the Cost of Capital: A Survey of the Theoretical Literature

Bertomeu, Jeremy; Cheynel, Edwige

doi:10.1111/abac.12076

Cited by 50 publications

(9 citation statements)

References 66 publications

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“…Extant literature documents associations between narrative reporting, corporate reporting environment, and firms' (implied) cost-of-capital. Bertomeu and Cheynel (2016) review theoretical literature on the subject, while Christensen et al (2019), Larcker and Rusticus (2010), and Leuz and Wysocki (2016) review the corresponding empirical literature (in particular, earlier studies). Therefore, our review complements and updates these prior reviews.…”

Section: Cost-of-capital Effectsmentioning

confidence: 99%

Narrative Reporting: State of the Art and Future Challenges

Michelon

Trojanowski

Sealy

2021

Accounting in Europe

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Narrative reporting, both in relation to financial and non-financial information, is increasingly used and often mandated, with significant managerial discretion regarding content. As policy makers consider reporting as a tool for regulation to steer the behaviour of companies towards improving practices and performance upon which they have to disclose, the aim of this paper is to provide the state of the art in the academic literature on narrative reporting and identify future challenges. In order to do so, the paper investigates three questions: (1) How has the quality of narrative reporting been defined?(2) What narrative information is required and used by various stakeholders? (3) What are the real effects of narrative reporting? In answering these three questions, our review also gives implications for both future academic research and policy makers.

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Section: Cost-of-capital Effectsmentioning

confidence: 99%

Narrative Reporting: State of the Art and Future Challenges

Michelon

Trojanowski

Sealy

2021

Accounting in Europe

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“…Some scholars believe that equity concentration is not conducive to the development of corporate performance. After the share-trading reform, the higher the company’s tradable shares, the greater the improvement in company performance ( Hail and Leuz, 2009 ; Antoniou et al, 2016 ; Bertomeu and Cheynel, 2016 ). However, considering that most of the largest shareholders of domestic listed companies are sponsor shareholders, although the internal mechanism can reduce agency costs, it also creates convenience for the absolute controlling shareholder to control the management, conduct related transactions, occupy funds, and other behaviors that will reduce the company’s performance ( Gode and Mohanram, 2003 ).…”

Section: Literature Reviewmentioning

confidence: 99%

Analysis of Equity Disputes in Listed Companies With Dispersed Ownership Structure and Protection of Small and Medium Shareholders’ Interests

Soh

Ong

et al. 2022

Front. Psychol.

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This paper selected Vanke as the case to study the governance problems of Vanke and the protection of the interests of small and medium shareholders under the situation of equity disputes. At the same time, the study further explored the advantages and disadvantages of the dispersed ownership structure, the long-term impact on the company’s development and the choice of the involved corporate governance methods under the current Chinese capital market conditions. This paper adopted the event research method and selected the period from June 2015 to June 2017 (24 months) as the observation period to analyze the market performance impact of Vanke in the equity disputes. At the same time, this paper also measured Vanke’s individual stock rate of return (Rit) and market rate of return (Rmt), and calculated Vanke’s normal rate of return [E(Ri,t)], abnormal rate of return (ARi,t), and cumulative abnormal rate of return (CARi) during different event windows ([−3,10]). Vanke’s shareholding was too dispersed and the stock price had been sluggish for a long time, which had greatly reduced the acquisition difficulty and cost of Baoneng, thus triggering the “barbarian invasion” of Baoneng. In the struggle for control, whether it was Vanke’s anti-takeover measures or China Resources, Baoneng, and Evergrande’s competition for equity, their actions had harmed the interests of small and medium shareholders. The market supervision department was too lenient to supervise and punish the interests of small and medium shareholders, and opportunism made behaviors that infringe on the interests of others more reckless. However, small and medium shareholders cannot actively participate in the company’s management decision-making to safeguard their legitimate rights and interests, which intensifies the violations of all parties in the equity disputes, thus forming a vicious circle. Therefore, the protection of the interests of small and medium shareholders required the joint efforts and consciousness of regulators, small and medium shareholders, and acquirers.

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“…projected cash flows), as is natural in accounting (Bhattacharya et al, 2012), the risk premium cannot be explained in terms of only variability or risk. To do so is to ignore the mean pay-off's effect, as recognised recently by Bertomeu and Cheynel (2015).…”

Section: Information and The Discount Ratementioning

confidence: 99%

When are investment projects in the same risk class?

Johnstone

2015

Accounting & Finance

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If two investments have the same pay-off covariance with the market but one has higher expected pay-off, which asset according to the CAPM has most risk? One answer is that as far as risk goes the two assets are the same, because they have the same covariance with the market. The correct answer, pointed out nearly four decades ago by Eugene Fama, but long overlooked, is that investments have the same risk, the same returns beta and the same CAPM discount rate if and only if they have the same ratio of ex ante pay-off covariance to pay-off mean. This insight clarifies much of the conventional wisdom that surrounds capital budgeting and 'risk-adjusted' discount rates, while also displaying the mechanics by which information arrival affects the CAPM cost of capital.

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Disclosure and the Cost of Capital: A Survey of the Theoretical Literature

Cited by 50 publications

References 66 publications

Narrative Reporting: State of the Art and Future Challenges

Narrative Reporting: State of the Art and Future Challenges

Analysis of Equity Disputes in Listed Companies With Dispersed Ownership Structure and Protection of Small and Medium Shareholders’ Interests

When are investment projects in the same risk class?

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