Abstract

http://ssrn.com/abstract=906152
 
 

References (28)



 
 

Citations (7)



 


 



Firm Specific Information and the Cost of Equity Capital


Philip G. Berger


University of Chicago - Booth School of Business

Huafeng (Jason) Chen


University of British Columbia (UBC) - Sauder School of Business

Feng Li


The Stephen M. Ross School of Business at the University of Michigan

September 14, 2012

EFA 2006 Zurich Meetings

Abstract:     
We develop a comprehensive and large-sample measure of a firm's information quality. The measure is the ratio of firm-specific return variation to firm-specific cash-flow variation. Empirical evidence supports the validity of our measure. Using this measure, we find that cost of equity capital decreases by about 0.4% on an annual basis if a firm's information quality increases by one standard deviation. This is consistent with the joint hypotheses that (1) firm-specific stock returns contain economic information as argued by Morck, Yeung, and Yu (2000) and (2) better information quality can lower the cost of equity.

Number of Pages in PDF File: 34

Keywords: information quality, the cost of equity capital, firm-specific information

working papers series


Download This Paper

Date posted: June 8, 2006 ; Last revised: September 18, 2012

Suggested Citation

Berger, Philip G. and Chen, Huafeng (Jason) and Li, Feng, Firm Specific Information and the Cost of Equity Capital (September 14, 2012). EFA 2006 Zurich Meetings. Available at SSRN: http://ssrn.com/abstract=906152 or http://dx.doi.org/10.2139/ssrn.906152

Contact Information

Philip G. Berger (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-8687 (Phone)
773-834-4585 (Fax)
Huafeng (Jason) Chen
University of British Columbia (UBC) - Sauder School of Business ( email )
2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
Feng Li
The Stephen M. Ross School of Business at the University of Michigan ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
Feedback to SSRN


Paper statistics
Abstract Views: 2,504
Downloads: 716
Download Rank: 17,636
References:  28
Citations:  7

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.344 seconds