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Cited by 3,436

The DOI matches its OpenAlex record; 2 of the 2 references it cites were found in a registry or an index.

Disclosure level and the cost of equity capital.

Christine A. Botosan·1997·The Accounting Review
DOI 10.2308/tar-9709240185
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Abstract

Abstract The effect of disclosure level on the cost of equity capital is a matter of considerable interest and importance to the financial reporting community. However, the association between disclosure level and cost of equity capital is not well established and has been difficult to quantify. In this paper I examine the association between disclosure level and the cost of equity capital by regressing firm-specific estimates of cost of equity capital on market beta, firm size and a self-constructed measure of disclosure level. My measure of disclosure level is based on the amount of voluntary disclosure provided in the 1990 annual reports of a sample of 122 manufacturing firms. For firms that attract a low analyst following, the results indicate that greater disclosure is associated with a lower cost of equity capital. The magnitude of the effect is such that a one-unit difference in the disclosure measure is associated with a difference of approximately twenty-eight basis points in the cost of equity capital, after controlling for market beta and firm size. For firms with a high analyst following, however, I find no evidence of an association between my measure of disclosure level and cost of equity capital perhaps because the disclosure measure is limited to the annual report and accordingly may not provide a powerful proxy for overall disclosure level when analysts play a significant role in the communication process.

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Metadata

Authors
Botosan, C. A.
Venue
The Accounting Review
Publisher
American Accounting Association
Published
1997-07-01
Volume
72
Issue
3
Pages
323-349
ISSN
0001-4826 (ISSN-L)
DOI
10.2308/tar-9709240185
OpenAlex
W1593455549
Cited by
3,436
References
2
FWCI
123.28
Type
journal article
Language
en
Open access
closed

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