Endogeneity and the Dynamics of Voluntary Disclosure Quality: Is There Really an Effect on the Cost of Equity Capital?

2014 ◽  
Author(s):  
Florian Eugster
Keyword(s):  
Voluntary Disclosure ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Disclosure Quality ◽  
The Cost

Disclosure, ownership structure, earnings announcement lag and cost of equity capital in emerging markets

2015 ◽  
Vol 16 (1) ◽  
pp. 28-57 ◽  
Author(s):  
Hichem Khlif ◽  
Khaled Samaha ◽  
Islam Azzam
Keyword(s):  
Ownership Structure ◽  
Voluntary Disclosure ◽  
Equity Capital ◽  
Annual Reports ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Government Ownership ◽  
Earnings Announcement ◽  
Content Type ◽  
The Cost

Purpose – The purpose of this paper is to examine the effect of voluntary disclosure, ownership structure attributes and timely disclosure on cost of equity capital in the emerging Egyptian capital market. Design/methodology/approach – A content analysis of annual reports is used to measure the extent of voluntary disclosure. Earnings announcement lag (EAL) is used to measure the quality of voluntary disclosure (i.e. timely disclosure). Finally, the Capital Asset Pricing Model (CAPM) framework is used to estimate cost of equity capital. Findings – The authors find a negative relationship between the level of voluntary disclosure and cost of equity capital. More specifically, the authors document that this association is strongly significant under high ownership dispersion, low government ownership and shorter EAL. Finally, EAL is positively associated with cost of equity capital. Research limitations/implications – The authors use the CAPM framework as a proxy for the cost of equity since forecasted earnings per share are not communicated by financial analysts in the Egyptian Stock Exchange. Practical implications – The findings demonstrate for managers that the increased levels of voluntary and timely disclosure reduce the cost of external finance and improve the marketability of firms’ equities, which may directly impact growth opportunities especially when information is communicated to investors in a timely fashion. For regulators, it provides evidence that high government ownership reduces the value relevance of voluntary disclosure among investors, while free float as a proxy for high ownership dispersion improves it. Originality/value – The findings show that corporate disclosure policy depends more on the managers’ incentives to provide informative annual reports than on standards and regulations. The study also represents a first attempt that demonstrates how ownership structure and timely disclosure influence the relationship between disclosure and cost of equity capital.

scholarly journals PENGARUH MANAJEMEN LABA, ASIMETRI INFORMASI, DAN PENGUNGKAPAN SUKARELA TERHADAP BIAYA MODAL EKUITAS

Paradigma ◽  
2020 ◽  
Vol 17 (2) ◽  
pp. 69-88
Author(s):  
Dian Desty Widyowati
Keyword(s):  
Earnings Management ◽  
Information Asymmetry ◽  
Voluntary Disclosure ◽  
Sampling Technique ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Independent Variables ◽  
The Cost ◽  
Positive Effect

The research method used multiple regression analysis. The data used are the annual financial statements of property companies listed on the Indonesia Stock Exchange 2014-2016. The sample is 87 companies with purposive sampling technique. The data is processed using SPSS (Statistical Product and Service Solution) Version 22. The results of this study indicate that earnings management has a positive effect on the cost of equity capital with a significant level of 0.000 and beta 0.712, information asymmetry has a significant effect on the cost of equity capital with a significant level of 0.087 and beta 0.139. , then voluntary disclosure has no significant effect on the cost of equity capital with a significant level of 0.955 and beta 0.004. In general, it can be concluded that earnings management has a positive effect on the cost of equity capital, while information asymmetry and voluntary disclosure have no significant effect on the cost of equity capital. Future studies consider adding other independent variables that can affect the cost of equity capital so that it can show a better correlation between the dependent and independent variables.

scholarly journals The Role of Firms’ Life Cycle Stages on Voluntary Disclosure and Cost of Equity Capital in Brazilian Public Companies

2020 ◽  
Vol 17 (6) ◽  
pp. 601-620
Author(s):  
Paulo Victor Novaes ◽  
Jose Elias Almeida
Keyword(s):  
Life Cycle ◽  
Voluntary Disclosure ◽  
Cost Of Capital ◽  
Equity Capital ◽  
Growth Stages ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Public Companies ◽  
Life Cycle Stages ◽  
The Cost

We examine the effects of firms’ life cycle stages on voluntary disclosure and the cost of equity capital. We also examine the relationship between the interaction of life cycle stages and voluntary disclosures measures on cost of equity capital. Our sample consists of non-financial Brazilian public companies, covered by analysts between 2008 and 2014, collected from I/B/E/S and Comdinheiro databases. We find that voluntary disclosure level is higher for firms in maturity and growth stages. We also find that firms in introduction and decline life cycle stages show higher implied cost of capital, however declining firms that increase voluntary disclosure reduce their cost of capital. Moreover, mature firms significantly reduce such inherent risk by reporting social and environmental voluntary information. Our results are useful for investors, practitioners, and regulators to the understanding of the incentives of voluntary disclosure practices.

Corporate ethical behavior and the cost of equity capital: evidence from the world’s most ethical companies

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rim Zouari-Hadiji ◽  
Yamina Chouaibi
Keyword(s):  
Sustainable Development ◽  
Business Ethics ◽  
Cost Estimation ◽  
Voluntary Disclosure ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Content Type ◽  
Ethical Approach ◽  
The Cost

Purpose This paper aims to examine the effect of the corporate ethical approach on the cost of equity capital. This study is conducted on a large international sample on behalf of the world’s most engaged firms from an ethical point of view in 2015. Design/methodology/approach The multivariate linear regression model is used to meet the purpose of this study and research hypotheses are also examined using a sample of 80 of most ethical firms in the world during the year 2015. Moreover, three variables (i.e. business ethics, corporate social responsibility and executive compensation based on the achievement of sustainable development goals) are used to reflect the corporate ethical approach and the implied cost of equity capital is used for estimating the cost of equity. In this regard, equity cost estimation is the most appropriate approach to test the effect of business ethics on the cost of financing firms. Findings Based on a sample of 80 firms emerging as the world’s most ethical firms in 2015, the results revealed that firms with better ethics scores are significantly associated with a reduced cost of equity capital. This paper also demonstrates that the executive incentive pays that are based on the objectives of sustainable development are able to explain different outcomes regarding the relation between corporate ethical behaviors and the cost of equity. These findings support arguments in the literature that firms with socially responsible practices have a higher valuation and lower risk. Originality/value This study provides implications for global regulators and policymakers when setting social reporting standards, suggesting that corporate ethical engagement reduces the cost of equity capital by decreasing the information asymmetry and thereby reducing the firms’ risk. Therefore, the findings may be informative to international managers and investors when considering the effect of business ethics on the firm’s ex-ante cost of equity. In this perspective, the voluntary disclosure of information makes it possible to mitigate the problems of asymmetry of information and conflict of interest between the firm and its main providers of capital, which could reduce the cost of equity.

Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting

2011 ◽  
Vol 86 (1) ◽  
pp. 59-100 ◽  
Author(s):  
Dan S. Dhaliwal ◽  
Oliver Zhen Li ◽  
Albert Tsang ◽  
Yong George Yang
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Voluntary Disclosure ◽  
Equity Capital ◽  
Forecast Errors ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Csr Disclosure ◽  
Corporate Social ◽  
The Cost

ABSTRACT: We examine a potential benefit associated with the initiation of voluntary disclosure of corporate social responsibility (CSR) activities: a reduction in firms’ cost of equity capital. We find that firms with a high cost of equity capital in the previous year tend to initiate disclosure of CSR activities in the current year and that initiating firms with superior social responsibility performance enjoy a subsequent reduction in the cost of equity capital. Further, initiating firms with superior social responsibility performance attract dedicated institutional investors and analyst coverage. Moreover, these analysts achieve lower absolute forecast errors and dispersion. Finally, we find that firms exploit the benefit of a lower cost of equity capital associated with the initiation of CSR disclosure. Initiating firms are more likely than non-initiating firms to raise equity capital following the initiations; among firms raising equity capital, initiating firms raise a significantly larger amount than do non-initiating firms.

scholarly journals LUAS PENGUNGKAPAN SUKARELA, ASIMETRI INFORMASI,DAN BIAYA MODAL EKUITAS

2017 ◽  
Vol 27 (1) ◽  
pp. 59
Author(s):  
Novita Adeliana Darma
Keyword(s):  
Information Asymmetry ◽  
Voluntary Disclosure ◽  
Stock Exchange ◽  
Equity Capital ◽  
Manufacturing Companies ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Analysis Model ◽  
The Cost ◽  
Path Analysis Model

This study examines the effect of voluntary disclosure on the cost of equity capita lwith information asymmetry as an intervening variablein manufacturing companies listed in Indonesia Stock Exchange in the period of 2008-2012. The total population of this study were 203 companies. The research hypotheses were tested using path analysis model with unbalanced panel data. The study concluded that the voluntary disclosure had indirect effect on the cost of equity capital by the information asymmetry as an intervening variable.Keywords: Voluntary Disclosure, InformationAsymmetry, Cost Of EquityCapital

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