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Cost of capital and earnings transparency

  • Barth, Mary E.
  • Konchitchki, Yaniv
  • Landsman, Wayne R.

We provide evidence that firms with more transparent earnings enjoy a lower cost of capital. We base our earnings transparency measure on the extent to which earnings and change in earnings covary contemporaneously with returns. We find a significant negative relation between our transparency measure and subsequent excess and portfolio mean returns, and expected cost of capital, even after controlling for previously documented determinants of cost of capital.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165410113000128
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Article provided by Elsevier in its journal Journal of Accounting and Economics.

Volume (Year): 55 (2013)
Issue (Month): 2 ()
Pages: 206-224

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Handle: RePEc:eee:jaecon:v:55:y:2013:i:2:p:206-224
Contact details of provider: Web page: http://www.elsevier.com/locate/jae

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