The Timeliness of Analysts' Earnings Forecasts and the Cost of Capital
26 Pages Posted: 13 Jun 2013 Last revised: 16 Jul 2013
Date Written: June 11, 2013
We empirically examine the associations between the cost of capital and the timeliness of analysts' earnings forecasts, as a proxy for disclosure precision. We document that as the precision of the information increases so does the cost of capital, consistent with prior research showing more timely disclosures are positively associated with the cost of capital, and that the precision of disclosure widens the information gap between informed and uninformed investors in an imperfect market. We also find that at a certain point, more timely analysts' forecasts are not positively associated with the cost of capital, although the relation is mixed.
Keywords: Cost of Capital, Timeliness, Analysts
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