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- Publisher
- Springer Journals
- Copyright
- Copyright © 2004 by Kluwer Academic Publishers
- Subject
- Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
- ISSN
- 1380-6653
- eISSN
- 1573-7136
- DOI
- 10.1023/B:RAST.0000028188.71604.0a
- Publisher site
- See Article on Publisher Site
Abstract
We examine the association between the cost of equity capital and the quality of public and private information. We find an inverse relationship between the cost of capital and the precision of public information, but the effect is more than offset by a positive relationship between the cost of equity capital and the precision of private information. Public and private information precisions are positively correlated, and a model that fails to include both is vulnerable to a correlated omitted variable bias. The association between public and private information combined with their opposing effects on the cost of capital implies mangers should consider the relationship between public and private information when assessing their reporting strategy.
Journal
Review of Accounting Studies – Springer Journals
Published: Sep 30, 2004