Information asymmetry, information dissemination and the effect of regulation FD on the cost of capital

Information asymmetry, information dissemination and the effect of regulation FD on the cost of... This paper considers the impact of Regulation Fair Disclosure (FD) on firms’ information environments and costs of capital. For NYSE/Amex firms we find little evidence of a change in the cost of capital attributable to Regulation FD. For Nasdaq firms we find that Regulation FD increased firms’ costs of capital by 10–19 basis points per annum though the statistical significance of this change is modest for some of our models. We also show substantial cross-sectional variation in the cost of capital changes. We find that cost of capital changes were negatively related to both pre-regulation firm size and PIN. In addition to the findings regarding Regulation FD, this research contributes to a growing literature that documents links between firms’ information environments and their costs of capital. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

Information asymmetry, information dissemination and the effect of regulation FD on the cost of capital

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Publisher
Elsevier
Copyright
Copyright © 2007 Elsevier B.V.
ISSN
0304-405x
D.O.I.
10.1016/j.jfineco.2006.12.005
Publisher site
See Article on Publisher Site

Abstract

This paper considers the impact of Regulation Fair Disclosure (FD) on firms’ information environments and costs of capital. For NYSE/Amex firms we find little evidence of a change in the cost of capital attributable to Regulation FD. For Nasdaq firms we find that Regulation FD increased firms’ costs of capital by 10–19 basis points per annum though the statistical significance of this change is modest for some of our models. We also show substantial cross-sectional variation in the cost of capital changes. We find that cost of capital changes were negatively related to both pre-regulation firm size and PIN. In addition to the findings regarding Regulation FD, this research contributes to a growing literature that documents links between firms’ information environments and their costs of capital.

Journal

Journal of Financial EconomicsElsevier

Published: Jan 1, 2008

References

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