Are Information Attributes Priced?
42 Pages Posted: 6 Dec 2003
There are 2 versions of this paper
Are Information Attributes Priced?
Are Information Attributes Priced?
Date Written: January 2007
Abstract
Easley and O'Hara 2004 (EO) and Lambert, Leuz, and Verrecchia 2006 (LLV) model the links between information attributes and cost of capital. We explore how differences in the authors' interpretations of their models and their assumptions lead to different predictions, and we examine the relation between cost of equity capital and the information attributes posited by EO. We find that cost of equity capital is increasing in composition, and decreasing in precision and dissemination as predicted by EO. Our results suggest that managers might realize cost of equity capital benefits by providing greater public disclosure, taking actions to encourage greater dissemination of information, and selecting accounting and disclosure practices that increase the precision of their information set.
Keywords: Cost of equity capital, disclosure, information asymmetry, information precision
JEL Classification: D82, G12, M41
Suggested Citation: Suggested Citation
Do you want regular updates from SSRN on Twitter?
Recommended Papers
-
By Christine Botosan and Marlene Plumlee
-
By Christine Botosan and Marlene Plumlee
-
By Paul M. Healy and Krishna Palepu
-
Information and the Cost of Capital
By Maureen O'hara and David Easley
-
Toward an Implied Cost of Capital
By William R. Gebhardt, Charles M.c. Lee, ...
-
Toward an Ex Ante Cost-of-Capital
By William R. Gebhardt, Charles M.c. Lee, ...
-
The World Price of Insider Trading
By Utpal Bhattacharya and Hazem Daouk
-
The Market Pricing of Earnings Quality
By Jennifer Francis, Ryan Lafond, ...