Accounting information, disclosure, and the cost of capital

• 成果类型: Article
• 署名作者: Lambert, Richard; Leuz, Christian; Verrecchia, Robert E.
• 署名单位: University of Pennsylvania; University of Chicago
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/j.1475-679X.2007.00238.x
• 发表日期: 2007
• 页码: 385-420
• 关键词: differential information; Financial disclosure; MARKET; RISK; equity; liquidity; earnings; equilibrium; prices; LEVEL

摘要

In this paper we examine whether and how accounting information about a firm manifests in its cost of capital, despite the forces of diversification. We build a model that is consistent with the Capital Asset Pricing Model and explicitly allows for multiple securities whose cash flows are correlated. We demonstrate that the quality of accounting information can influence the cost of capital, both directly and indirectly. The direct effect occurs because higher quality disclosures affect the firm's assessed covariances with other firms' cash flows, which is nondiversifiable. The indirect effect occurs because higher quality disclosures affect a firm's real decisions, which likely changes the firm's ratio of the expected future cash flows to the covariance of these cash flows with the sum of all the cash flows in the market. We show that this effect can go in either direction, but also derive conditions under which an increase in information quality leads to an unambiguous decline in the cost of capital.