Does graph disclosure bias reduce the cost of equity capital?
AbstractResearch on disclosure and capital markets focuses primarily on the amount of information provided but pays little attention to the presentation format of this information. This paper examines the impact of graph utilization and graph quality (distortion) on the cost of equity capital, controlling for the interaction between disclosure and graph distortion. Despite the advantages of graphs in communicating information, our results show that graphutilization does not have a significant impact on users’ decisions. However we observe a significant (negative) association between graph distortion and the ex-ante cost of equity. This effect though, disappears if we use realised returns as a measure of ex-post cost of equity. Moreover, we find that disclosure and graph distortion interact so that the impact of disclosure on the cost of capital depends on graph integrity. For low level of overall disclosure, graph distortion reduces the ex-ante cost of equity. However for high level of disclosure graph distortion increases the ex-ante cost of equity.
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Bibliographic InfoPaper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0039.
Length: 44 pages
Date of creation: Apr 2007
Date of revision:
equity capital; graphs;
Find related papers by JEL classification:
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
This paper has been announced in the following NEP Reports:
- NEP-ACC-2007-08-18 (Accounting & Auditing)
- NEP-ALL-2007-08-18 (All new papers)
- NEP-CFN-2007-08-18 (Corporate Finance)
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