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Financial reporting frequency, information asymmetry, and the cost of equity

Author

Listed:
  • Fu, Renhui
  • Kraft, Arthur
  • Zhang, Huai

Abstract

Using hand-collected data on firms’ interim reporting frequency from 1951 to 1973, we examine the impact of financial reporting frequency on information asymmetry and the cost of equity. Our results show that higher reporting frequency reduces information asymmetry and the cost of equity, and they are robust towards considerations of the endogenous nature of firms’ reporting frequency choice. We obtain similar results when we focus on mandatory changes in reporting frequency. Our results suggest the benefits of increased reporting frequency.

Suggested Citation

  • Fu, Renhui & Kraft, Arthur & Zhang, Huai, 2012. "Financial reporting frequency, information asymmetry, and the cost of equity," Journal of Accounting and Economics, Elsevier, vol. 54(2), pages 132-149.
  • Handle: RePEc:eee:jaecon:v:54:y:2012:i:2:p:132-149
    DOI: 10.1016/j.jacceco.2012.07.003
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    References listed on IDEAS

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    Cited by:

    1. Iatridis, George Emmanuel, 2016. "Financial reporting language in financial statements: Does pessimism restrict the potential for managerial opportunism?," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 1-17.
    2. repec:bla:acctfi:v:57:y:2017:i:1:p:289-315 is not listed on IDEAS
    3. Keiichi Kubota & Hitoshi Takehara, 2016. "Information Asymmetry and Quarterly Disclosure Decisions by Firms: Evidence From the Tokyo Stock Exchange," International Review of Finance, International Review of Finance Ltd., vol. 16(1), pages 127-159, March.
    4. repec:jso:coejbm:v:4:y:2016:i:3:p:130-139 is not listed on IDEAS
    5. repec:spr:reaccs:v:22:y:2017:i:2:d:10.1007_s11142-017-9391-5 is not listed on IDEAS
    6. Walter P. Mkumbuzi, 2016. "Influence of Intellectual Capital Investment, Risk, Industry Membership and Corporate Governance Mechanisms on the Voluntary Disclosure of Intellectual Capital by UK Listed Companies," Asian Social Science, Canadian Center of Science and Education, vol. 12(1), pages 42-74, January.
    7. repec:sek:jijobm:v:5:y:2017:i:2:p:40-63 is not listed on IDEAS
    8. repec:eco:journ1:2017-03-39 is not listed on IDEAS
    9. Houdou Basse Mama & Rachidi Kotchoni, 2017. "Investor Relations' Quality and Mispricing," EconomiX Working Papers 2017-33, University of Paris Nanterre, EconomiX.
    10. repec:eee:jaecon:v:64:y:2017:i:2:p:340-345 is not listed on IDEAS
    11. Ricardo Campos-Espinoza & Hanns de la Fuente-Mella & Berta Silva-Palavecinos & David Cademartori-Rosso, 2015. "Adopting the IFRS and its impact on reducing information asymmetry in the Chilean capital market," Netnomics, Springer, vol. 16(3), pages 193-204, December.
    12. Croci, Ettore & Petmezas, Dimitris, 2015. "Do risk-taking incentives induce CEOs to invest? Evidence from acquisitions," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 1-23.
    13. repec:eee:jocaae:v:12:y:2016:i:1:p:35-60 is not listed on IDEAS
    14. repec:spr:reaccs:v:22:y:2017:i:2:d:10.1007_s11142-017-9393-3 is not listed on IDEAS
    15. Barakat, Ahmed & Chernobai, Anna & Wahrenburg, Mark, 2014. "Information asymmetry around operational risk announcements," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 152-179.
    16. Karampatsas, Nikolaos & Petmezas, Dimitris & Travlos, Nickolaos G., 2014. "Credit ratings and the choice of payment method in mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 474-493.
    17. Fu, Renhui & Gao, Fang & Kim, Yong H. & Qiu, Buhui, 2017. "Performance volatility, information availability, and disclosure reforms," Journal of Banking & Finance, Elsevier, vol. 75(C), pages 35-52.
    18. repec:eee:corfin:v:48:y:2018:i:c:p:442-459 is not listed on IDEAS
    19. repec:eee:jaecon:v:64:y:2017:i:2:p:313-339 is not listed on IDEAS
    20. Ying Cao & Linda A. Myers & Albert Tsang & Yong George Yang, 0. "Management forecasts and the cost of equity capital: international evidence," Review of Accounting Studies, Springer, vol. 0, pages 1-48.

    More about this item

    Keywords

    Interim reporting frequency; Information asymmetry; Cost of equity;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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