Disclosure and the Cost of Capital: a Survey of the Theoretical Literature

Authors

• Jeremy Bertomeu, Baruch College CUNYFollow
• Edwige Cheynel, Columbia University

ORCID

Jeremy Bertomeu, https://orcid.org/0000-0001-6746-5767

Language

English (en)

Publication Date

2016

Abstract

This article offers a survey of theoretical research on disclosure a nd the cost of capital. We summarize the current state of the literature and discuss the c hannels through which information affects the cost of capital. After giving an overview of a sset pricing theory, we examine the rationale for an accounting risk factor or an ex-ante e ffect of information on the cost of capital. Then, we discuss the role of voluntary disclosur e, heterogenous beliefs, investor base, liquidity shocks, earnings management and agency p roblems as determinants of the cost of capital. Linkages between productive decisions and t he cost of capital, and their implication for investor welfare, are also examined.

Document Type

Working Paper

DOI

https://doi.org/10.7936/z4db-rp60

Author's Department

Accounting

Author's School

Olin Business School

Recommended Citation

Bertomeu, Jeremy and Cheynel, Edwige, "Disclosure and the Cost of Capital: a Survey of the Theoretical Literature" (2016). Olin Business School Faculty Research. 3.
https://openscholarship.wustl.edu/business_facpubs/3