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Information and the cost of capital: The Easley-O’Hara (2004) model with endogenous information acquisition

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Author Info

  • Greg Clinch

    (University of Melbourne, Australia,)

  • Brett Lombardi

    (University of Melbourne, Australia)

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    Abstract

    We investigate the impact of endogenous information acquisition on Easley and O’Hara’s (2004) result that moving information from being publicly to privately available results in an increase in a firm’s cost of capital. As in Christensen et al. (2010), when the cost of information acquisition is fixed, Easley and O’Hara’s result reverses. We study two scenarios, however, where Easley and O’Hara’s result can continue to hold (i): where the cost of information acquisition is increasing in its precision, and (ii) where the benefits of acquiring private information span multiple firms.

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    File URL: http://aum.sagepub.com/content/36/1/5.abstract
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    Bibliographic Info

    Article provided by Australian School of Business in its journal Australian Journal of Management.

    Volume (Year): 36 (2011)
    Issue (Month): 1 (April)
    Pages: 5-14

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    Handle: RePEc:sae:ausman:v:36:y:2011:i:1:p:5-14

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    Web page: http://www.agsm.edu.au

    Related research

    Keywords: cost of capital; endogenous information acquisition;

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