Disclosure Strategies and Cost of Capital

Urquiza, Francisco Bravo; Navarro, María Cristina Abad; Trombetta, Marco

doi:10.1002/mde.2562

Cited by 16 publications

(19 citation statements)

References 41 publications

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“…Therefore, the level of information asymmetry will decrease for large companies. The negative relationship between firm size and cost of capital is explained also by the fact that the risk of insolvency of large companies is less than the smaller companies which confirms the reduction in the cost of capital for large companies (Urquiza et al, 2012). Consequently, large companies are expected to have a high level of disclosure which leads to less cost of capital, greater precision and less dispersion in financial analysts' forecasts.…”

Section: Model and Variables Of Researchmentioning

confidence: 88%

“…The properties of analysts' forecasts (error and dispersion) are used as a measure of information asymmetry in the second and third models: According to Urquiza et al, (2012), the measure of the capital cost is problematic in this current literature. Thus, to calculate this cost, the formula of Easton, (2004), which is widely adopted by previous studies (Li, 2010;Urquiza et al, 2012;Kim et al, 2013;and Nahar et al, 2016), was used.…”

Section: Model and Variables Of Researchmentioning

confidence: 99%

“…Thus, to calculate this cost, the formula of Easton, (2004), which is widely adopted by previous studies (Li, 2010;Urquiza et al, 2012;Kim et al, 2013;and Nahar et al, 2016), was used. These authors state that the measure proposed by (Easton, 2004) is a robust assessment of specific cost of capital.…”

Section: Model and Variables Of Researchmentioning

confidence: 99%

“…This treatment is justified by the specific accounting and financial characteristics of these organisms that might bias the results (Urquiza et al, 2012). The choice of long term study involves several interests.…”

Section: Sample and Datamentioning

confidence: 99%

See 3 more Smart Citations

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

Turki¹,

Wali²,

Boujelbène³

2017

AABFJ

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The purpose of this paper is to examine the relationship between the mandatory adoption of IFRS/IAS and the information content of earnings in the European Union. More accurately, this study aims to determine if the effect of IFRS adoption on the level of information asymmetry, apprehended by the cost of capital and the financial analysts' forecasts, is immediate or delayed. Based on a longitudinal study, we find evidence that for the two first years of adoption, international standards reduces significantly the cost of capital and the dispersion of the financial analysts' forecasts. Furthermore, the magnitude of this effect increases with increasing the number of years after IFRS adoption. The findings further show that the effect of IFRS adoption on financial analysts' errors is not immediate and that the errors decrease from the third year following the date of the first adoption.Overall, the findings of this study highlight the importance of adopting IFRS in the reduction of information asymmetry. AbstractThe purpose of this paper is to examine the relationship between the mandatory adoption of IFRS/IAS and the information content of earnings in the European Union. More accurately, this study aims to determine if the effect of IFRS adoption on the level of information asymmetry, apprehended by the cost of capital and the financial analysts' forecasts, is immediate or delayed. Based on a longitudinal study, we find evidence that for the two first years of adoption, international standards reduces significantly the cost of capital and the dispersion of the financial analysts' forecasts. Furthermore, the magnitude of this effect increases with increasing the number of years after IFRS adoption. The findings further show that the effect of IFRS adoption on financial analysts' errors is not immediate and that the errors decrease from the third year following the date of the first adoption.Overall, the findings of this study highlight the importance of adopting IFRS in the reduction of information asymmetry. JEL Classification: M40, G34

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Section: Model and Variables Of Researchmentioning

confidence: 88%

Section: Model and Variables Of Researchmentioning

confidence: 99%

Section: Model and Variables Of Researchmentioning

confidence: 99%

Section: Sample and Datamentioning

confidence: 99%

See 2 more Smart Citations

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

Turki¹,

Wali²,

Boujelbène³

2017

AABFJ

View full text Add to dashboard Cite

show abstract

“…Petrova et al (2012) confirmed this notion for another sample of 121 listed Swiss firms. Comparably, Urquiza et al (2012) find, for a sample of 36 Spanish firms, that forward-looking information in the annual report is associated with a decrease in the cost of equity capital. Leuz and Verrecchia (2000) use the choice of accounting standard (IFRS and/or US-GAAP vs. German GAAP) as a proxy for disclosure level and find evidence of a hypothesized association with bid-ask spreads and trading volumes.…”

Section: Literature Reviewmentioning

confidence: 79%

Let’s talk strategy: the impact of voluntary strategy disclosure on the cost of equity capital

Sieber

Weißenberger

Oberdörster

et al. 2014

Bus Res

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This paper deals with the impact of voluntary strategy disclosure in management reports on the cost of equity capital. Such an impact is not obvious, as investors might consider strategy information as “cheap talk” and therefore ignore it. We analyze a sample of 100 German listed firms from 2002 to 2008, measuring strategy disclosure levels using hand-collected strategy disclosure scores. We find that higher disclosure levels are, on average, associated with lower cost of equity capital even after controlling for overall disclosure quality. The paper contributes to the field by providing evidence that voluntary strategy disclosures in firms’ management reports reduce the information asymmetry component of cost of capital and therefore can be considered as a relevant source of information for investors.

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Are risk disclosures an effective tool to increase firm value?

Bravo

2017

Manage Decis Econ

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The objective of this paper is to test the effect of risk disclosures on firm value. The results show that the disclosure of information on risks is positively associated with the value of a firm. In addition, our findings highlight that this association is mediated by corporate reputation, which improves for enhanced risk disclosure practices. This evidence is particularly important to understand the usefulness of the disclosure of information on risks in the dialogue between a firm and its stakeholders. Managers and regulators can better understand the consequences of the communication of information on risks.

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Disclosure Strategies and Cost of Capital

Cited by 16 publications

References 41 publications

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

IFRS Mandatory Adoption Effect on the Information Asymmetry: Immediate or Delayed?

Let’s talk strategy: the impact of voluntary strategy disclosure on the cost of equity capital

Are risk disclosures an effective tool to increase firm value?

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