Social disclosure, financial disclosure and the cost of equity capital

The relation is tested between financial and social disclosure and the cost of equity capital for a sample of Canadian firms with year-ends in 1990, 1991 and 1992. It is found that, consistent with prior research, the quantity and quality of financial disclosure is negatively related to the cost of...

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Published inAccounting, organizations and society Vol. 26; no. 7-8; pp. 597 - 616
Main Authors Richardson, Alan J, Welker, Michael
Format Journal Article
LanguageEnglish
Published Oxford Pergamon Press Inc 01.10.2001
Subjects
Accounting
Canada
Capital
Correlation analysis
Disclosure
Enterprises
Equity
Equity capital
Financial disclosure
Financial performance
Forecasts
Size of enterprise
Stakeholder
Studies
Canada
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Summary:The relation is tested between financial and social disclosure and the cost of equity capital for a sample of Canadian firms with year-ends in 1990, 1991 and 1992. It is found that, consistent with prior research, the quantity and quality of financial disclosure is negatively related to the cost of equity capital for firms with low analyst following. Contrary to expectations, there is a significant positive relation between social disclosures and the cost of equity capital. This positive relationship is mitigated among firms with better financial performance. Some biases in social disclosures are considered which may explain this result. It is also noted that social disclosures may benefit the firm through its effect on organizational stakeholders other than equity investors.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0361-3682
1873-6289
DOI:10.1016/S0361-3682(01)00025-3