Web-Based Non-Financial Disclosure and Cost of Finance

Abstract

We study the association of Web-based non-financial disclosure and a firm's cost of finance within an international context (North America and Continental Europe). We examine voluntary Web placement of non-financial disclosures using an information index covering a firm's value creation process. We find a negative association between the level of Web-based non-financial disclosure and the implied cost of equity capital in North America and in Continental Europe. Continental European firms with higher levels of Web-based non-financial disclosure also tend to benefit from a lower information asymmetry and from a lower cost of debt capital, whereas North American firms do not.

Keywords: Continental Europe, cost of debt capital, implied cost of equity capital, endogeneity, cost of finance, information asymmetry, Internet reporting, non-financial disclosure, North America, Web disclosure