Information Overload and Cost of Equity Capital

47 Pages Posted: 14 Mar 2017 Last revised: 14 Jan 2018

See all articles by Narjess Boubakri

Narjess Boubakri

American University of Sharjah - School of Business and Management; HEC Montreal - Department of Finance

Dev R. Mishra

University of Saskatchewan - Edwards School of Business

Date Written: October 15, 2017

Abstract

In recent years, corporate filings and their important sections have become thicker and longer. At the same time investors are swamped with information that is available through media, analysts and other sources creating information overload. Using several firm level proxies of information overload and several firm-level proxies of cost of equity capital, we examine in this paper whether information overload affects firms required rate of returns (i.e. financing costs). Based on a sample of 13418 firm-years during the 1993 to 2009 period, we find that information overload significantly and positively affects cost of equity capital. These results are robust to a series of validity checks.

Keywords: Implied Cost of Equity, Information Overload, MD&A

JEL Classification: G1, G3, M4

Suggested Citation

Boubakri, Narjess and Mishra, Dev R., Information Overload and Cost of Equity Capital (October 15, 2017). Asian Finance Association (AsianFA) 2018 Conference. Available at SSRN: https://ssrn.com/abstract=2931362 or http://dx.doi.org/10.2139/ssrn.2931362

Narjess Boubakri

American University of Sharjah - School of Business and Management ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

HOME PAGE: http://www.aus.edu

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Dev R. Mishra (Contact Author)

University of Saskatchewan - Edwards School of Business ( email )

Edwards School of Business
Saskatoon, Saskatchewan S7N 5A7
Canada
306-966-8457 (Phone)
306-966-2515 (Fax)

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