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Disclosure and cost of equity capital in emerging markets: The Brazilian case

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  • Lopes, Alexsandro Broedel
  • de Alencar, Roberta Carvalho
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    Abstract

    In this paper, we conjecture that the weak association between disclosure and cost of equity capital found in the literature (Botosan, 1997) can be caused by the high-level corporate disclosure environment found in the United States. We hypothesize that in low-level corporate disclosure environments the variability in disclosure practices across firms will be larger than in the United States, and, consequently, the marginal effect of voluntary disclosure policies will be higher. Using a newly developed Brazilian Corporate Disclosure Index (BCDI), our results confirm this hypothesis. Disclosure is strongly associated with ex ante cost of equity capital for Brazilian firms. The results are more pronounced for firms with less analyst coverage and low ownership concentration, as expected.

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    Bibliographic Info

    Article provided by Elsevier in its journal The International Journal of Accounting.

    Volume (Year): 45 (2010)
    Issue (Month): 4 (December)
    Pages: 443-464

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    Handle: RePEc:eee:accoun:v:45:y:2010:i:4:p:443-464

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    Web page: http://www.elsevier.com/locate/inca/620179

    Related research

    Keywords: Disclosure Cost of capital Financial accounting Emerging markets Brazil;

    References

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    1. Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer & Robert W. Vishny, 1999. "Investor Protection and Corporate Valuation," NBER Working Papers 7403, National Bureau of Economic Research, Inc.
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    11. Ding, Yuan & Jeanjean, Thomas & Stolowy, Herve, 2005. "Why do national GAAP differ from IAS? The role of culture," The International Journal of Accounting, Elsevier, vol. 40(4), pages 325-350.
    12. Ball, Ray & Kothari, S. P. & Robin, Ashok, 2000. "The effect of international institutional factors on properties of accounting earnings," Journal of Accounting and Economics, Elsevier, vol. 29(1), pages 1-51, February.
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