A theory of voluntary disclosure and cost of capital

• Autores: Edwige Cheynel
• Localización: Review of Accounting Studies, ISSN-e 1573-7136, Vol. 18, Nº. 4, 2013, págs. 987-1020
• Idioma: alemán
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• Resumen

  • This paper explores the links between firms� voluntary disclosures and their cost of capital. Existing studies investigate the relation between mandatory disclosures and cost of capital and find no cross-sectional effect but a negative association in time-series. In this paper, I find that when disclosure is voluntary firms that disclose their information have a lower cost of capital than firms that do not disclose, but the association between voluntary disclosure and cost of capital for disclosing and nondisclosing firms is positive in aggregate. I further examine whether reductions in cost of capital indicate improved risk-sharing or investment efficiency. I also find that high (low) disclosure frictions lead to overinvestment (underinvestment) relative to first-best. As average cost of capital proxies for risk-sharing but not investment efficiency, the relation between cost of capital and ex ante efficiency may be ambiguous and often irrelevant.