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Disclosure Level (disclosure + level)
Selected AbstractsA Re-examination of Disclosure Level and the Expected Cost of Equity CapitalJOURNAL OF ACCOUNTING RESEARCH, Issue 1 2002Christine A. Botosan This paper examines the association between the cost of equity capital and levels of annual report and timely disclosure, and investor relations activities. We estimate the cost of equity capital using the classic dividend discount model. We find that the cost of equity capital decreases in the annual report disclosure level but increases in the level of timely disclosures. The latter result is contrary to theory but is consistent with managers' claims that greater timely disclosures may increase the cost of equity capital, possibly through increased stock price volatility. We find no association between the cost of equity capital and the level of investor relations activities. We conclude that aggregating across different disclosure types results in a loss of information. Failing to include all disclosure types in regression analyses may lead to a correlated omitted variable bias and erroneous conclusions. [source] EVIDENCE THAT GREATER DISCLOSURE LOWERS THE COST OF EQUITY CAPITALJOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2000Christine A. Botosan The effect of corporate disclosure on the cost of equity capital is a matter of considerable interest and importance to both corporations and the investment community. However, the relationship between disclosure level and cost of capital is not well established and has proved difficult for researchers to quantify. As described in this article, the author's 1997 study (published in The Accounting Review) was the first to measure and detect a direct relationship between disclosure and cost of capital. After examining the annual reports of 122 manufacturing companies, the author concluded that companies providing more extensive disclosure had a lower (forward-looking) cost of equity capital (measured using Value Line forecasts with an EBO valuation formula that derives from the dividend discount model). For companies with extensive analyst coverage, differences in disclosure do not appear to affect cost of capital. But for companies with small analyst followings, differences in disclosure do appear to matter. Among this group of companies, the firms judged to have the highest level of disclosure had a cost of equity capital that was nine-percentage points lower than otherwise similar firms with a minimal level of disclosure. Closer analysis of some of the specific disclosure practices also suggests that, for small firms with limited analyst coverage, there are benefits to providing more forward-looking information, such as forecasts of sales, profits, and capital expenditures, and enhanced disclosure of key non-financial statistics, such as order backlogs, market share, and growth in units sold. In closing, the article also discusses an interesting new study (by Lang and Lundholm) that suggests there is an important distinction between effective corporate disclosure and "hyping the stock." The findings of this study show that while higher levels of disclosures are associated with higher stock prices, sudden increases in the frequency of disclosure are viewed with skepticism. [source] Firm-level Disclosures and the Relative Roles of Culture and Legal OriginJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 3 2003Ole-Kristian Hope In this paper, I investigate the relative roles of legal origin and national culture in explaining firm-level disclosure levels internationally. Using a significantly larger and more representative sample than prior research, I document, using univariate and multivariate analyses, that both legal origin and culture (as operationalized by Hofstede and Schwartz) are important in explaining firm disclosure. Neither legal origin nor culture dominates with respect to overall explanatory power for variations in disclosure levels. Consequently, it is premature to write off culture as an important factor in the financial reporting environment. Furthermore, I find that legal origin is an important conditioning variable for the role of culture. Finally, although legal origin is a key determinant of disclosure levels, I hypothesize and find that its importance decreases with the richness of a firm's information environment. [source] | ||||||||||