The Cost of Financial Flexibility: Information Opacity, Agency Conflicts and REIT at-the-Market (ATM) Equity Offerings

2021 ◽  
Author(s):  
George D. Cashman ◽  
David M. Harrison ◽  
Shelly Howton ◽  
Benjamin Scheick
Keyword(s):  
Agency Conflicts ◽  
Equity Offerings ◽  
Financial Flexibility ◽  
Information Opacity ◽  
The Cost

How are corporate disclosures related to the cost of capital? The fundamental role of information asymmetry

2016 ◽  
Vol 54 (7) ◽  
pp. 1669-1701 ◽  
Author(s):  
Beatriz Cuadrado-Ballesteros ◽  
Isabel-Maria Garcia-Sanchez ◽  
Jennifer Martinez Ferrero
Keyword(s):  
Information Asymmetry ◽  
Cost Of Capital ◽  
Agency Conflicts ◽  
Content Type ◽  
Mediator Role ◽  
International Setting ◽  
The Cost ◽  
Role Of Information ◽  
Corporate Disclosures

Purpose – The purpose of this paper is to analyze empirically the fundamental role that information asymmetry plays in the functioning of an efficient capital market as mediator in the relation between corporate disclosures and cost of capital. Design/methodology/approach – By using a sample of 1,260 international non-financial listed companies in the period 2007-2014. Findings – The findings suggest that high-quality financial and social disclosures quality reduce the cost of capital, by decreasing information asymmetry. In other words, the authors find evidence of the mediator role of information asymmetry in the relation between corporate disclosures and the cost of capital. These results are also controlled for differences on accounting standards and other institutional factors. Originality/value – The central assumption is that the demand for corporate disclosures that reduces the information advantages of some investors (who are more informed) arises from agency conflicts and these information differences in turn, determine the cost of capital. This paper is the first attempt to study, jointly, the effects of decreasing information asymmetries by corporate disclosures on the cost of capital in an international setting. In addition, the authors focussed on both financial and social disclosures, creating empirical proxies whose validity for the analysis has been evidenced.

The Role of Internal Control in the Equity Issue Market: Evidence From Seasoned Equity Offerings

2015 ◽  
Vol 32 (3) ◽  
pp. 303-328 ◽  
Author(s):  
Xinghua Gao ◽  
Yonghong Jia
Keyword(s):  
Internal Control ◽  
Risk Premium ◽  
Dominant Role ◽  
Seasoned Equity Offerings ◽  
Equity Capital ◽  
Equity Offerings ◽  
Equity Issue ◽  
Sarbanes Oxley ◽  
The Cost

This article examines the role of internal control requirements under the Sarbanes–Oxley (SOX) Act of 2002 in firms’ cost of raising equity capital. We find that, prior to the disclosure of internal control weaknesses (ICWs), ICWs are not directly associated with underwriters’ gross spread and seasoned equity offering (SEO) underpricing. After the disclosure, however, underwriters charge a risk premium on ICW issuers, especially on those disclosing ICWs in multiple consecutive years. We also find that SEO underpricing is exacerbated by multiple-year-disclosed ICWs but not by first-timers. More notably, we find that managers play a dominant role in deciding issue size pre-disclosure, but this dominance weakens post-disclosure. Taken together, our evidence suggests that internal controls help moderate the cost of raising equity capital and that ICW disclosures have significant implications for underwriters in the equity issue market.

Sustainability engagement in Latin America firms and cost of equity

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Renato Garzón Jiménez ◽  
Ana Zorio-Grima
Keyword(s):  
Latin America ◽  
Positive Impact ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Agency Conflicts ◽  
Cost Of Equity ◽  
Content Type ◽  
Sustainable Behavior ◽  
The Cost ◽  
The Impact

PurposeCorporate social responsibility (CSR) actions are expected to reduce information asymmetries and increase legitimacy among the stakeholders of the company, which consequently should have a positive impact on the financial conditions of the firm. Hence, the objective of this paper is to find empirical evidence on the negative relationship between sustainable behavior and the cost of equity, in the specific context of Latin America. To address this issue, some proxies and moderating variables for sustainability are used in our study.Design/methodology/approachThe regression model considers a sample with 252 publicly trading firms and 2,772 firm-year observations, from 2008 to 2018. The generalized method of moments is used to avoid endogeneity problems.FindingsThe study finds evidence that firms with higher environmental, social and governance activities disclosed by sustainability reports and assured by external providers decrease their cost of equity, especially if they are in an integrated market as MILA. This finding confirms that agency conflicts between firm's management and stakeholders diminish with higher CSR transparency, leading to a lower cost of capital.Originality/valueOur research is unique and valuable as, to our knowledge, it is the first study to analyze the impact of sustainable behavior and the cost of equity from companies operating in Latin America.

scholarly journals Does Financial Market Structure Affect the Cost of Raising Capital?

2020 ◽  
pp. 1-38
Author(s):  
James Brugler ◽  
Carole Comerton-Forde ◽  
Terrence Hendershott
Keyword(s):  
New York ◽  
Market Structure ◽  
Stock Exchange ◽  
Seasoned Equity Offerings ◽  
Trading Costs ◽  
Equity Offerings ◽  
Institutional Trading ◽  
York Stock Exchange ◽  
The One ◽  
The Cost

Abstract We provide evidence on market structure and the cost of raising capital by examining changes in market structure in U.S. equity markets. Only the Order Handling Rules (OHR) of the Nasdaq, the one reform that reduced institutional trading costs, lowered the cost of raising capital. Using a difference-in-differences framework relative to the New York Stock Exchange (NYSE) that exploits the OHR’s staggered implementation, we find that the OHR reduced the underpricing of seasoned equity offerings by 1–2 percentage points compared with a pre-OHR average of 3.6%. The effect is the largest in stocks with the largest reduction in institutional trading costs after the OHR.

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