The impact of multi-dimensional corporate transparency on us firms’ credit ratings and cost of capital

The impact of multi-dimensional corporate transparency on us firms’ credit ratings and cost of... This study examines corporate transparency in the US market for a sample of 319 S&P 500 firms. We examine whether a number of disparate measures of corporate transparency used by other researchers are distinct, cohere as measures of a single factor of corporate transparency, or capture multiple different dimensions. Next, we begin to examine the impact of corporate transparency, conceived in the broadest sense, and not limited to financial reporting, on US firms. We develop a model of corporate transparency based on a broad definition and framework proposed by Bushman, Piotrowski and Smith, which we extend in several ways, and then study the effect of corporate transparency on cost of debt, credit rating, and cost of equity. First, we find that corporate transparency is neither a unitary concept nor merely an ambiguous term for multiple distinct concepts: factor analysis of ten corporate transparency variables identifies four independent underlying dimensions: public disclosure information, intermediary information, earnings quality information and insider information. Second, we find that corporate transparency has significant power to explain cross-sectional variation in credit rating and cost of capital. More specifically, (i) credit rating, cost of debt, and beta are significantly associated with disclosure information transparency; (ii) credit rating, cost of equity, and beta are significantly associated with intermediary information transparency; and (iii) cost of equity and beta are significantly associated with insider information transparency. Our findings offer a more comprehensive evaluation of corporate transparency than prior studies, and we demonstrate direct economic implications for both US firms and markets. Review of Quantitative Finance and Accounting Springer Journals

The impact of multi-dimensional corporate transparency on us firms’ credit ratings and cost of capital

Loading next page...
Springer US
Copyright © 2011 by Springer Science+Business Media, LLC
Economics / Management Science; Finance/Investment/Banking; Accounting/Auditing; Econometrics; Operations Research/Decision Theory
Publisher site
See Article on Publisher Site


You’re reading a free preview. Subscribe to read the entire article.

DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • No expiration
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches


Start Free Trial

14-day Free Trial

Best Deal — 39% off

Annual Plan

  • All the features of the Professional Plan, but for 39% off!
  • Billed annually
  • No expiration
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.



billed annually
Start Free Trial

14-day Free Trial