Disclosure, Transaction Costs and Investor Clienteles

Posted: 21 Apr 1997

See all articles by Robert J. Bloomfield

Robert J. Bloomfield

Cornell University - Samuel Curtis Johnson Graduate School of Management

T. Jeffrey Wilks

Brigham Young University

Date Written: December 1996

Abstract

Theoretical and empirical research suggests that firms can reduce their cost of capital by providing more informative disclosures about the value of their securities. We provide convergent evidence on this issue by demonstrating that improved disclosure reduces cost of capital in a controlled laboratory environment in which we can more accurately measure disclosure quality, the cost of capital and transaction costs. We also find that, as suggested by Amihud and Mendelson (1986, 1989), disclosure has greater benefits when the firm's investor clientele has a short trading horizon, primarily because short-horizon investors place a greater value on the improved liquidity and lower transaction costs associated with higher quality disclosures.

JEL Classification: M41, G12

Suggested Citation

Bloomfield, Robert J. and Wilks, Thomas Jeffrey, Disclosure, Transaction Costs and Investor Clienteles (December 1996). Available at SSRN: https://ssrn.com/abstract=2944

Robert J. Bloomfield (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

450 Sage Hall
Ithaca, NY 14853
United States
607-255-9407 (Phone)
607-254-4590 (Fax)

Thomas Jeffrey Wilks

Brigham Young University ( email )

School of Accountancy
526 Tanner Building
Provo, UT 84602 84602
United States
801-422-3930 (Phone)
801-422-0621 (Fax)

HOME PAGE: http://marriottschool.byu.edu/directory/details?id=5337

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