2016
DOI: 10.1111/abac.12076
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Disclosure and the Cost of Capital: A Survey of the Theoretical Literature

Abstract: This article offers a survey of theoretical research on disclosure and the cost of capital. We summarize the current state of the literature and discuss the channels through which information affects the cost of capital. After giving an overview of asset pricing theory, we examine the rationale for an accounting risk factor or an ex-ante effect of information on the cost of capital. Then, we discuss the role of voluntary disclosure, heterogenous beliefs, investor base, liquidity shocks, earnings management, an… Show more

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Cited by 52 publications
(9 citation statements)
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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%
“…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%
“…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%
“…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%