Annual Report Narratives and the Cost of Equity Capital: U.K. Evidence of a U-shaped Relation

Vasiliki Athanasakou, Florian Eugster, Thomas Schleicher, Martin Walker*

*Motsvarande författare för detta arbete

Forskningsoutput: TidskriftsbidragArtikelVetenskapligPeer review

3 Citeringar (Scopus)

Sammanfattning

We hypothesize and test for a U-shaped relation between the cost of equity capital and the level of disclosure in annual report narratives. Using a computer-generated word-count-based index of the level of disclosure in U.K. annual report narratives, we document a negative relation with the cost of equity capital at low levels of disclosure, and a positive relation at higher levels of disclosure, together implying the presence of an optimal level of disclosure. We interpret the positive relation at higher levels of disclosure as evidence of uninformative clutter increasing the cost of equity capital. Additional analyses indicate the presence of both firm-level learning and regulatory corporate reporting initiatives as factors shaping adjustments towards optimum levels of disclosure.
OriginalspråkEngelska
Referentgranskad vetenskaplig tidskriftEuropean Accounting Review
Sidor (från-till)27-54
ISSN0963-8180
DOI
StatusPublicerad - 26.01.2020
MoE-publikationstypA1 Originalartikel i en vetenskaplig tidskrift

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