Shin (J Account Res 44(2):351–379, 2006) has argued that in order to understand the equilibrium patterns of corporate disclosure, it is necessary for researchers to work within an asset pricing framework in which corporate disclosures are endogenously determined. Echoing this sentiment, Larcker and Rusticus (J Account Econ 49(3):186–205, 2010) have argued that earlier empirical results claiming to find a negative relationship between disclosure and cost of capital may suffer fatally from endogeneity issues which, once addressed by a formal structural model, may reverse the sign of the relationship. The purpose of this paper is to introduce a general equilibrium model following the Black–Scholes paradigm with endogeneous disclosure in which firms select uniquely determined optimal probabilities of early equity-value discovery in a noisy environment. As firms may differ also in the uncertainty (precision) with which management can forecast the future, managers strategically increase the intensity of their (voluntary) disclosures to provide partial compensation for this perceived differential risk. A positive relationship then results between disclosure and the cost of capital.
Review of Quantitative Finance and Accounting – Springer Journals
Published: May 23, 2013
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
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.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera