Disclosure and the Cost of Capital: A Survey of the Theoretical Literature
Routledge Companion to Accounting Theory, Forthcoming
Abacus, Forthcoming
35 Pages Posted: 26 Sep 2014 Last revised: 8 Mar 2016
There are 2 versions of this paper
Disclosure and the Cost of Capital: A Survey of the Theoretical Literature
Disclosure and the Cost of Capital: A Survey of the Theoretical Literature
Date Written: September 24, 2014
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 and agency problems as determinants of the cost of capital. Linkages between productive decisions and the cost of capital, and their implication for investor welfare, are also examined.
Keywords: asset pricing, trading, markets, expected return, accounting
JEL Classification: G12, G14, G31, M41, M45
Suggested Citation: Suggested Citation
Register to save articles to
your library
Recommended Papers
-
Stock Prices and Earnings: A History of Research
By Patricia M. Dechow, Richard G. Sloan, ...
-
Mandatory Disclosure and Asymmetry in Financial Reporting
By Jeremy Bertomeu and Robert P. Magee
-
Textual Analysis in Accounting and Finance: A Survey
By Tim Loughran and Bill Mcdonald
-
Mandatory Disclosure Quality, Inside Ownership, and Cost of Capital
By John E. Core, Luzi Hail, ...
-
By Ilia D. Dichev, John R. Graham, ...
-
Accrual Reversals and Cash Conversion
By Matthew J. Bloomfield, Joseph J. Gerakos, ...
-
A Five-Factor Asset Pricing Model
By Eugene F. Fama and Kenneth R. French
-
A Theory of Hard and Soft Information
By Jeremy Bertomeu and Ivan Marinovic