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


  • Greg Clinch

    (University of Melbourne, Australia,)

  • Brett Lombardi

    (University of Melbourne, Australia)


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.

Suggested Citation

  • Greg Clinch & Brett Lombardi, 2011. "Information and the cost of capital: The Easley-O’Hara (2004) model with endogenous information acquisition," Australian Journal of Management, Australian School of Business, vol. 36(1), pages 5-14, April.
  • Handle: RePEc:sae:ausman:v:36:y:2011:i:1:p:5-14

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    Cited by:

    1. Filzen, Joshua J. & Schutte, Maria Gabriela, 2017. "Comovement, financial reporting complexity, and information markets: Evidence from the effect of changes in 10-Q lengths on internet search volumes and peer correlations," The North American Journal of Economics and Finance, Elsevier, vol. 39(C), pages 19-37.


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