Information Risk and the Cost of Capital: Review of the Empirical Literature  

Oleh:

Habib, Ahsan

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: Journal of Accounting Literature vol. 2006 no. 25 (2006), page 127-168.
Topik: Public Sector Accounting; PSA; Cost of Capital; Corporate Governance Risk
Fulltext: JAL 06 25 127.pdf (3.78MB)

Isi artikel

The paper is organised as follows. The next section briefly discusses the theoretical underpinnings of the effect of the role of information on the cost of capital. Section three surveys evidence on the estimation approach of the cost of equity capital. Since early cost of capital measures are based on realized returns as an ex ante measure of expected returns, the limitations of this approach are described and recent developments to estimating the cost of capital using current price, analysts' earnings expectations are elucidated. Section four surveys the empirical evidence on the relationship between information quality and cost of capital. Sub-section one looks at the role of increased disclosure in reducing the cost of capital. Sub-section two summarizes evidence on the role of earnings quality in reducing cost of capital. Finally, sub-section three summarizes research findings on the impact of corporate governance risk on the cost of capital. Section five concludes with suggestions for future research.

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