The DOI matches its Crossref record; 3 of the 3 references it cites were found in a registry or an index.
Toward an Implied Cost of Capital
Open accessAbstract
In this study, we propose an alternative technique for estimating the cost of equity capital. Specifically, we use a discounted residual income model to generate a market implied cost‐of‐capital. We then examine firm characteristics that are systematically related to this estimate of cost‐of‐capital. We show that a firm's implied cost‐of‐capital is a function of its industry membership, B/M ratio, forecasted long‐term growth rate, and the dispersion in analyst earnings forecasts. Together, these variables explain around 60% of the cross‐sectional variation in future (two‐year‐ahead) implied costs‐of‐capital. The stability of these long‐term relations suggests they can be exploited to estimate future costs‐of‐capital. We discuss the implications of these findings for capital budgeting, investment decisions, and valuation research.
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Cites
Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
JEGADEESH, N., & TITMAN, S. (1993) · The Journal of Finance · doi:10.1111/j.1540-6261.1993.tb04702.x · Cited by 11,584
Disclosure, Liquidity, and the Cost of Capital
DIAMOND, D. W., & VERRECCHIA, R. E. (1991) · The Journal of Finance · doi:10.1111/j.1540-6261.1991.tb04620.x · Cited by 3,836
Extra-Market Components of Covariance in Security Returns
Rosenberg, B. (1974) · The Journal of Financial and Quantitative Analysis · doi:10.2307/2330104 · Cited by 296
Cited by
Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, Y. G. (2011) · The Accounting Review · doi:10.2308/accr.00000005 · Cited by 4,337
Does corporate social responsibility affect the cost of capital?
El Ghoul, S., Guedhami, O., Kwok, C. C. Y., & Mishra, D. R. (2011) · Journal of Banking & Finance · doi:10.1016/j.jbankfin.2011.02.007 · Cited by 3,465
Accounting Information, Disclosure, and the Cost of Capital
LAMBERT, R., LEUZ, C., & VERRECCHIA, R. E. (2007) · Journal of Accounting Research · doi:10.1111/j.1475-679x.2007.00238.x · Cited by 2,586
Costs of Equity and Earnings Attributes
Francis, J., LaFond, R., Olsson, P. M., & Schipper, K. (2004) · The Accounting Review · doi:10.2308/accr.2004.79.4.967 · Cited by 2,377
Environmental externalities and cost of capital
Chava, S. (2014) · Management Science · doi:10.1287/mnsc.2013.1863 · Cited by 1,851
Metadata
- Authors
- Gebhardt, W. R., Lee, C. M. C., & Swaminathan, B.
- Venue
- Journal of Accounting Research
- Publisher
- Wiley
- Published
- 2001-06
- Volume
- 39
- Issue
- 1
- Pages
- 135-176
- ISSN
- 0021-8456 (ISSN-L)
- 1475-679X
- OpenAlex
- W3126017435
- Cited by
- 2,000
- References
- 3
- FWCI
- 115.40
- Type
- journal article
- Language
- en
- Open access
- green
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- Gebhardt, W. R., Lee, C. M. C., & Swaminathan, B. (2001). Toward an Implied Cost of Capital. Journal of Accounting Research. https://doi.org/10.1111/1475-679x.00007
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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