Abstract:
The paper examines the relationship between Chinese listed companies’ annual report risk disclosures and cost of equity capital. Based on the risk disclosures data of A-share companies from 2007 to 2014, we find that: firstly, the changes in cost of equity capital positively associate with the changes in textual risk disclosures, even when we try to control the endogenous problems. The results indicate that risk disclosures are useful for decreasing the cost of equity capital, supporting the heterogeneous perspective. Secondly, the negative relation between risk disclosures and cost of equity capital tends to happen to the companies that the information environment is better and fundamentals risk is lower. Thirdly, the paper also finds that the increases in risk disclosures associate with increased market reaction and decreased heterogeneous beliefs and information asymmetry. Besides, the information asymmetry plays a role of partial mediation in this relationship of risk disclosures and cost of equity capital. Finally, the increases in risk disclosures are also associated with the increasing possibilities of conducting SEO and issuing bonds, and the decreases in discount rate of bond. This paper uses Chinese specific data to explore the relation between risk disclosure and cost of equity capital.The findings show different evidences comparing to foreign studies and complement prior research on the relationship of information disclosure and cost of equity capital.
王雄元, 高曦. 年报风险披露与权益资本成本[J]. 金融研究, 2018, 451(1): 174-190.
WANG Xiongyuan, GAO Xi. Risk Disclosures in Annual Report and Cost of Equity Capital. Journal of Financial Research, 2018, 451(1): 174-190.
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