首页|Corporate risk disclosure and cost of capital: Does measurement matter?
Corporate risk disclosure and cost of capital: Does measurement matter?
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NETL
NSTL
Wiley
This study argues that different definitions/perceptions of risk informationcould affect investors' decisions differently. Using a sample of 328 nonfinancial UK firms and departing from existing literature, this study measurescorporate risk disclosure (RD) via computerized content analysis to capturefour different perspectives of defining RD. This study investigates (ⅰ) the effectsof these RD measures on the Cost of Capital (COC), (ⅱ) the influence of analysts' coverage on the relationship between RD and COC, and (ⅲ) whether theRD nature (favourable/unfavourable) might affect COC differently. Lendersand equity holders are found not to consider any risk information expressed asa variation around a target, while only lenders consider risk information thatreveals negative outcomes. However, lenders and equity holders consider riskinformation that expresses negative and positive outcomes together. Besides,firms that disclose extra risk information and have a large analyst followingsuffer from a higher Cost of Equity (COE) compared with those with feweranalysts following. Additionally, lenders impose a lower interest rate on firmswith a higher unfavourable RD, while equity holders ask for lower returnsfrom the firms with a higher favourable RD. The study has significant implications for capital market participants, researchers, and policymakers.
annual reportcost of debtcost of equityrisk disclosure
Awad Elsayed Awad Ibrahim、Ahmed Aboud
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Faculty of Business&Law,Portsmouth University,Portsmouth,UK
Faculty of Business and Law,University of Portsmouth||Faculty of Commerce,Beni-Suef University,Egypt
NETL
NSTL
Wiley
