Costs of equity and earnings attributes

• 成果类型: Article
• 署名作者: Francis, J; LaFond, R; Olsson, PM; Schipper, K
• 署名单位: Duke University; University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2004.79.4.967
• 发表日期: 2004
• 页码: 967-1010
• 关键词: time-series properties; DISCLOSURE LEVEL; VALUE-RELEVANCE; conservatism; equilibrium; accruals; return; RISK; persistence; Timeliness

摘要

We examine the relation between the cost of equity capital and seven attributes of earnings: accrual quality, persistence, predictability, smoothness, value relevance, timeliness, and conservatism. We characterize the first four attributes as accounting-based because they are typically measured using accounting information only. We characterize the last three attributes as market-based because proxies for these constructs are typically based on relations between market data and accounting data. Based on theoretical models predicting a positive association between information quality and cost of equity, we test for and find that firms with the least favorable values of each attribute, considered individually, generally experience larger costs of equity than firms with the most favorable values. The largest cost of equity effects are observed for the accounting-based attributes, in particular, accrual quality. These findings are robust to controls for innate determinants of the earnings attributes (firm size, cash flow and sales volatility, incidence of loss, operating cycle, intangibles use/intensity, and capital intensity), as well as to alternative proxies for the cost of equity capital.