Information Asymmetry, Information Dissemination and the Effect of Regulation FD on the Cost of Capital

2006 ◽  
Author(s):  
Jefferson Duarte ◽  
Xi Han ◽  
Jarrad Harford ◽  
Lance A. Young
Keyword(s):  
Information Asymmetry ◽  
Information Dissemination ◽  
Cost Of Capital ◽  
Asymmetry Information ◽  
Regulation Fd ◽  
The Cost

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

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.

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.

scholarly journals When Does Information Asymmetry Affect the Cost of Capital?

2010 ◽  
Vol 49 (1) ◽  
pp. 1-40 ◽  
Author(s):  
CHRISTOPHER S. ARMSTRONG ◽  
JOHN E. CORE ◽  
DANIEL J. TAYLOR ◽  
ROBERT E. VERRECCHIA
Keyword(s):  
Information Asymmetry ◽  
Cost Of Capital ◽  
The Cost

scholarly journals Investor Competition over Information and the Pricing of Information Asymmetry

2011 ◽  
Vol 87 (1) ◽  
pp. 35-58 ◽  
Author(s):  
Brian K. Akins ◽  
Jeffrey Ng ◽  
Rodrigo S. Verdi
Keyword(s):  
Information Asymmetry ◽  
Cost Of Capital ◽  
Institutional Investor ◽  
Fundamental Question ◽  
Information Environment ◽  
Cross Sectional ◽  
The Cost ◽  
Jel Classifications

ABSTRACT Whether the information environment affects the cost of capital is a fundamental question in accounting and finance research. Relying on theories about competition between informed investors as well as the pricing of information asymmetry, we hypothesize a cross-sectional variation in the pricing of information asymmetry that is conditional on competition. We develop and validate empirical proxies for competition using the number and concentration of institutional investor ownership. Using these proxies, we find a lower pricing of information asymmetry when there is more competition. Overall, our results suggest that competition between informed investors has an important effect on how the information environment affects the cost of capital. JEL Classifications: G12; G14.

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