Disclosure Level and Cost Equity: A Theoretical Framework

Nowadays the users of financial reports are more demanding and requesting better information of a company’s performance. With the sophistication in the business environment, disclosure is becoming more important to business communities. The impact of information disclosure in the annual reports to the cost of equity capital is of significant interest to managers. This paper review literatures from many theoretical papers and empirical studies the effect information disclosure on cost equity capital. Many theories being discuss in this paper such as agency cost theory, signaling theory, capital markets transaction hypothesis, and positive accounting theory. Many empirical studies proved that disclosure reduce cost equity capital by reducing the information asymmetry and increasing the companies’ liquidity.

HOW ADJUSTMENT COST RELATE WITH STICKINESS COST?

This study aims to analyze stickiness cost and how the adjustment cost affects stickiness cost. Equity intensity is used as a proxy for measuring the adjustment cost. The population of this research is consumer goods company listed on the Indonesia Stock Exchange in 2014-2015, there are 24 companies that became the sample of this study. This research used multiple linear regression to analyze the data. The results showed stickiness cost in consumer goods companies. Further equity intensity is an indicator that can indicate a condition or characteristics of an organization or company that can be used to predict stickiness cost.

Defining certainty of net benefit: a GRADE concept paper

Grading of Recommendations Assessment, Development and Evaluation (GRADE) methodology is used to assess and report certainty of evidence and strength of recommendations. This GRADE concept article is not GRADE guidance but introduces certainty of net benefit, defined as the certainty that the balance between desirable and undesirable health effects is favourable. Determining certainty of net benefit requires considering certainty of effect estimates, the expected importance of outcomes and variability in importance, and the interaction of these concepts. Certainty of net harm is the certainty that the net effect is unfavourable. Guideline panels using or testing this approach might limit strong recommendations to actions with a high certainty of net benefit or against actions with a moderate or high certainty of net harm. Recommendations may differ in direction or strength from that suggested by the certainty of net benefit or harm when influenced by cost, equity, acceptability or feasibility.

A Practical Approach To Estimating The Cost Of Equity For South African Firms Undertaking Cross-Border Investments

Corporate finance literature has developed a number of models for use in estimating the cost equity in for cross-border investments. Most of the models, if not all, are specifically developed for use by US firms investing in emerging markets. The widely used models are the home country CAPM, the local CAPM, the country-risk adjusted CAPM or the Lessard model, the Godfrey-Espinosa model, the Goldman Sachs model, the Gamma model and the SalomonSmithBarney model. Using a hypothetical case study of FirstRand Limited’s proposed investments in Ireland and Turkey, this study tests for the suitability of the reverse-engineered versions of these models in estimating the cost of equity for a South African firm planning to invest in both Ireland (developed country) and Turkey (emerging country). The results of the study indicate that the Godfrey-Espinosa the Goldman-Sachs models are equivalent. The Lassard model is equivalent to the Gamma or Damodaran mode, and both models yielded estimates closer to the SalomonSmithBarney model. All the models’ estimates for the Turkish investment are consistent with the credit ratings of both Turkey and South Africa. The cost equity estimates show that FirstRand Limited investors will demand an additional risk premium for investments in Turkey. The cost of equity estimates for the Irish investment are mixed, inconsistent with the Ireland’s credit rating and had a higher standard deviation than the estimates for the Turkish investment. The Irish estimates seem to be largely affected by the country’s high country and banking industry betas. The reverse-engineered versions of these models are suitable for use by firms in emerging countries.