Voluntary disclosure and the cost of capital

Greg Clinch*, Robert E. Verrecchia

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)

Abstract

We investigate the association between voluntary disclosure and the risk-related discount investors apply to price. First, we study the association between (endogenous) disclosure choice and the discount in price induced by changes in the underlying model parameters: this informs empirical research that ignores endogeneity of disclosure by, for example, omitting the exogenous determinants of disclosure and the discount in price from the regressions employed. Second, we investigate the incremental effect of disclosure on the discount in price: this informs empirical research that controls for the direct effect of exogenous factors on the discount in price by, for example, including the exogenous variables in regression models employed. Finally, we examine the incremental effect of disclosure on the discount in price when changes in disclosure are not induced by changes in underlying exogenous parameters: this further informs empirical research that controls for the effect of exogenous factors on both the discount in price and disclosure, and focuses on the association between ‘unexplained disclosure’ and the discount.

Original languageEnglish
Pages (from-to)201-223
Number of pages23
JournalAustralian Journal of Management
Volume40
Issue number2
DOIs
Publication statusPublished - 4 May 2015
Externally publishedYes

Keywords

  • Cost of capital
  • voluntary disclosure

Fingerprint Dive into the research topics of 'Voluntary disclosure and the cost of capital'. Together they form a unique fingerprint.

Cite this