Disentangling the Effects of Corporate Disclosure on the Cost of Equity Capital: A Study of the Role of Intellectual Capital Disclosure.

Mangena, M., Li, J. and Tauringana, V., 2016. Disentangling the Effects of Corporate Disclosure on the Cost of Equity Capital: A Study of the Role of Intellectual Capital Disclosure. Journal of Accounting, Auditing & Finance, 31 (1), 3- 27.

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DOI: 10.1177/0148558X14541443

Abstract

In this article, we investigate whether intellectual capital (IC) and financial disclosures jointly affect the firm’s cost of equity capital. In contrast to prior research, we disaggregate disclosures into IC and financial disclosures and examine whether the two disclosure types are jointly related to the cost of equity capital. We also investigate whether IC and financial disclosures have an interaction effect on the cost of equity capital. Using data for a sample of 125 U.K. firms, we find a negative relationship between the cost of equity capital and IC disclosure. We find that the relationship between financial disclosure and the cost of equity capital is magnified when combined with IC disclosure. In addition, we find that IC and financial disclosures interact in shaping their effects on the cost of equity capital. Further analyses suggest that the effect of financial disclosure on the cost of equity capital is augmented for firms characterized by a medium level of IC disclosure. These results provideimportant insights into the relationship between disclosures and cost of equity capital and have policy and practical implications.

Item Type:Article
ISSN:0967-5426
Subjects:UNSPECIFIED
Group:Business School
ID Code:22977
Deposited By: Unnamed user with email symplectic@symplectic
Deposited On:08 Dec 2015 16:22
Last Modified:05 Apr 2016 13:17

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