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Cost of Equity Capital and Disclosure Level in Brazilian Companies

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  • Roberta Alencar

    (UNIFOR – University of Fortaleza)

Abstract

This paper investigates and correlates disclosure level with cost of capital for Brazilian companies. Theory says that better disclosure results in reduced cost of capital, and prior studies in other countries confirm the theory, but there are reasons to believe that the same effect is not observed in the Brazilian market. The research took into account data obtained from Economática database, referring to 222 enterprises listed in the Stock Exchange. The conclusion drawn from such data shows that, as far as the Brazilian market goes, disclosure level does not influence the cost of capital. These findings require further detailed investigation. Besides, two other results were found, which not only are contrary to the expectations originated from the theory, but also reinforce findings from other existing research: bigger enterprises offer higher return than smaller enterprises, and corporate governance practices have not resulted in a change in cost of capital.

Suggested Citation

  • Roberta Alencar, 2005. "Cost of Equity Capital and Disclosure Level in Brazilian Companies," Brazilian Business Review, Fucape Business School, vol. 2(1), pages 1-12, January.
    • Handle: RePEc:bbz:fcpbbr:v:2:y:2005:i:1:p:1-12
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    References listed on IDEAS

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    1. Luzi Hail, 2002. "The impact of voluntary corporate disclosures on the ex-ante cost of capital for Swiss firms," European Accounting Review, Taylor & Francis Journals, vol. 11(4), pages 741-773.
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    Cited by:

    1. Shailesh Rastogi & Bhakti Agarwal, 2023. "Transparency and disclosure (TD) and valuation of Indian banks," Bank i Kredyt, Narodowy Bank Polski, vol. 54(5), pages 519-540.
    2. Venkata Mrudula Bhimavarapu & Shailesh Rastogi & Rebecca Abraham, 2022. "The Influence of Transparency and Disclosure on the Valuation of Banks in India: The Moderating Effect of Environmental, Social, and Governance Variables, Shareholder Activism, and Market Power," JRFM, MDPI, vol. 15(12), pages 1-17, December.
    3. B. Charumathi & Latha Ramesh, 2020. "Impact of Voluntary Disclosure on Valuation of Firms: Evidence from Indian Companies," Vision, , vol. 24(2), pages 194-203, June.
    4. Sampaio, Joelson Oliveira & Gallucci Netto, Humberto & Silva, Vinicius Augusto Brunassi, 2017. "Mandatory IFRS adoption in Brazil and firm value," Textos para discussão 442, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).

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