The Role of Voluntary Disclosure on Information Asymmetry and Its Impact on the Cost of Capital

2017 ◽  
Vol 23 (9) ◽  
pp. 8389-8394
Author(s):  
Mustafa Yuosef Saa’deh ◽  
Nor Raihan Mohamad ◽  
Hafiza Aishah Hashim
Keyword(s):  
Information Asymmetry ◽  
Voluntary Disclosure ◽  
Cost Of Capital ◽  
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.

Thirty years after water privatization—is the English model the envy of the world?

2020 ◽  
Vol 36 (1) ◽  
pp. 69-85 ◽  
Author(s):  
Dieter Helm
Keyword(s):  
Cost Of Capital ◽  
Superior Performance ◽  
Water Regulation ◽  
Water Privatization ◽  
Balance Sheets ◽  
The World ◽  
Private Incentives ◽  
Regulation Model ◽  
The Cost

Abstract The paper considers whether water privatization 30 years ago has delivered the promised superior performance to nationalization, which remains the dominant model in Europe. The paper sets out the arguments at privatization, in particular in relation to efficiency, the managerial incentives, the role of private-sector balance sheets in facilitating investment, and the impacts on the cost of capital. Alternative explanations of relative performance, notably the regulation model adopted, are highlighted, and the paper concludes by outlining an alternative model of water regulation which better marries up public responsibilities and private incentives.

scholarly journals Information Asymmetry, Information Precision, and the Cost of Capital*

2011 ◽  
Vol 16 (1) ◽  
pp. 1-29 ◽  
Author(s):  
Richard A. Lambert ◽  
Christian Leuz ◽  
Robert E. Verrecchia
Keyword(s):  
Information Asymmetry ◽  
Cost Of Capital ◽  
Asymmetry Information ◽  
Information Precision ◽  
The Cost

Accounting for Software Development Costs and Information Asymmetry

2005 ◽  
Vol 80 (4) ◽  
pp. 1211-1231 ◽  
Author(s):  
Emad Mohd
Keyword(s):  
Software Development ◽  
Information Asymmetry ◽  
Cost Of Capital ◽  
Software Industry ◽  
High Tech ◽  
Bid Ask Spread ◽  
Development Costs ◽  
Software Firms ◽  
The Cost ◽  
The Impact

I investigate the impact of implementing SFAS No. 86, which provides an exception to the GAAP requirement of the immediate expensing of research and development (R&D), on information asymmetry. Using bid-ask spread and share turnover as proxies for information asymmetry, I find that after the introduction of SFAS No. 86, information asymmetry decreases for software firms relative to that of other high-tech firms. Within the software industry, I find that information asymmetry is significantly lower for firms that capitalize (capitalizers) than for those who expense (expensers) software development costs. Thus, accounting for software development costs per SFAS No. 86 reduces information asymmetry and, consequently, the cost of capital. As well, investors' uncertainty about the future benefits of software development costs is reduced when firms capitalize these costs.

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