IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

An Empirical Test of the Optimal Disclosure Hypothesis

  • Jankensgård, Håkan

    ()

Registered author(s):

    According to the cost-of-capital hypothesis, increased voluntary disclosure should reduce information asymmetries, lower the cost of capital, and increase firm value. The optimal-disclosure hypothesis, however, predicts that costs related to voluntary disclosure lead to the existence of an interior optimum of disclosure that maximizes firm value. These hypotheses are tested using disclosure indexes based on analysts’ ratings of firms’ financial reports for a sample of 181 Swedish firms. For annual reports, the data supports the optimal disclosure hypothesis, whereas for quarterly reports the findings suggest the existence of a “disclosure premium” in accordance with the cost of capital hypothesis.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.lusem.lu.se/media/kwc/working-papers/kwc-wp-2013-6.pdf
    Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Niclas Andrén)

    or (Frederik Lundtofte)


    Download Restriction: no

    Paper provided by Knut Wicksell Centre for Financial Studies, Lund University in its series Knut Wicksell Working Paper Series with number 2013/6.

    as
    in new window

    Length: 44 pages
    Date of creation: 24 Feb 2013
    Date of revision:
    Handle: RePEc:hhs:luwick:2013_006
    Contact details of provider: Postal: Knut Wicksell Centre for Financial Studies, Lund University School of Economics and Management, P.O. Box 7080, S-220 07 Lund, Sweden
    Phone: +46 46-222 32 61
    Fax: +46 46-222 34 06
    Web page: http://www.lusem.lu.se/kwc

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Diamond, Douglas W & Verrecchia, Robert E, 1991. " Disclosure, Liquidity, and the Cost of Capital," Journal of Finance, American Finance Association, vol. 46(4), pages 1325-59, September.
    2. Diamond, Douglas W, 1985. " Optimal Release of Information by Firms," Journal of Finance, American Finance Association, vol. 40(4), pages 1071-94, September.
    3. Nagar, Venky & Nanda, Dhananjay & Wysocki, Peter, 2003. "Discretionary disclosure and stock-based incentives," Journal of Accounting and Economics, Elsevier, vol. 34(1-3), pages 283-309, January.
    4. Nikolaev, V. & van Lent, L.A.G.M., 2005. "The endogeneity bias in the relation between cost-of-debt capital and corporate disclosure policy," Other publications TiSEM 04869b30-e8a9-4ecf-84ae-6, Tilburg University, School of Economics and Management.
    5. Holger Daske & Günther Gebhardt, 2006. "International financial reporting standards and experts' perceptions of disclosure quality," Abacus, Accounting Foundation, University of Sydney, vol. 42(3-4), pages 461-498.
    6. Ng, Jeffrey, 2011. "The effect of information quality on liquidity risk," Journal of Accounting and Economics, Elsevier, vol. 52(2), pages 126-143.
    7. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
    8. Cheung, Yan-Leung & Jiang, Ping & Tan, Weiqiang, 2010. "A transparency Disclosure Index measuring disclosures: Chinese listed companies," Journal of Accounting and Public Policy, Elsevier, vol. 29(3), pages 259-280, June.
    9. Chen, Carl R. & Steiner, Thomas L., 2000. "Tobin's q, managerial ownership, and analyst coverage: A nonlinear simultaneous equations model," Journal of Economics and Business, Elsevier, vol. 52(4), pages 365-382.
    10. Barry, Christopher B. & Brown, Stephen J., 1984. "Differential information and the small firm effect," Journal of Financial Economics, Elsevier, vol. 13(2), pages 283-294, June.
    11. Yawen Jiao, 2011. "Corporate Disclosure, Market Valuation, and Firm Performance," Financial Management, Financial Management Association International, vol. 40(3), pages 647-676, 09.
    12. Richard Lambert & Christian Leuz & Robert E. Verrecchia, 2007. "Accounting Information, Disclosure, and the Cost of Capital," Journal of Accounting Research, Wiley Blackwell, vol. 45(2), pages 385-420, 05.
    13. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
    14. Valeri Nikolaev & Laurence van Lent, 2005. "The endogeneity bias in the relation between cost-of-debt capital and corporate disclosure policy," European Accounting Review, Taylor & Francis Journals, vol. 14(4), pages 677-724.
    15. Bhushan, Ravi, 1989. "Firm characteristics and analyst following," Journal of Accounting and Economics, Elsevier, vol. 11(2-3), pages 255-274, July.
    16. David Easley & Maureen O'hara, 2004. "Information and the Cost of Capital," Journal of Finance, American Finance Association, vol. 59(4), pages 1553-1583, 08.
    17. Brown, S., 1979. "The Effect of Estimation Risk on Capital Market Equilibrium," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 14(02), pages 215-220, June.
    18. Christine A. Botosan, 2002. "A Re-examination of Disclosure Level and the Expected Cost of Equity Capital," Journal of Accounting Research, Wiley Blackwell, vol. 40(1), pages 21-40, 03.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:hhs:luwick:2013_006. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Niclas Andrén)

    or (Frederik Lundtofte)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.