Abstract

http://ssrn.com/abstract=2370644
 


 



Property Crime, Earnings Variability, and the Cost of Capital


James Brushwood


Colorado State University, Fort Collins - Department of Accounting

Dan S. Dhaliwal


University of Arizona - Department of Accounting

Douglas J. Fairhurst


Washington State University

Matthew Serfling


University of Tennessee

June 27, 2016

Journal of Corporate Finance, Forthcoming

Abstract:     
We show that firms located in states where property crime is more prevalent have more uncertain earnings and higher financing costs. Specifically, firms located in states with higher property crime rates have more volatile and less persistent earnings as well as lower quality analysts’ earnings forecasts. Firms located in states with higher property crime rates also have a higher cost of equity and debt capital. These results are robust to accounting for econometric and endogeneity concerns in various ways. Overall, our results suggest that a potentially large and overlooked cost of crime is a higher cost of capital.

Number of Pages in PDF File: 88

Keywords: Earnings variability, Cost of equity, Cost of debt, Property crime, Theft

JEL Classification: G30, M41


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Date posted: December 22, 2013 ; Last revised: August 4, 2016

Suggested Citation

Brushwood, James and Dhaliwal, Dan S. and Fairhurst, Douglas J. and Serfling, Matthew, Property Crime, Earnings Variability, and the Cost of Capital (June 27, 2016). Journal of Corporate Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2370644 or http://dx.doi.org/10.2139/ssrn.2370644

Contact Information

James Brushwood
Colorado State University, Fort Collins - Department of Accounting ( email )
256 Rockwell Hall
Fort Collins, CO 80523
United States
Dan S. Dhaliwal
University of Arizona - Department of Accounting ( email )
McClelland Hall
PO Box 210108
Tucson, AZ 85721
United States
Douglas J. Fairhurst
Washington State University ( email )
Todd Hall
P.O. Box 644746
Pullman, WA WA 85721-0108
United States
Matthew Serfling (Contact Author)
University of Tennessee ( email )
Haslam College of Business
Knoxville, TN 37996
United States
865-974-1952 (Phone)
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