TY - JOUR
T1 - Segment Disclosure and Cost of Capital
AU - Blanco, Belen
AU - Garcia Lara, Juan M.
AU - Tribo, Josep A.
N1 - Publisher Copyright:
© 2015 John Wiley & Sons Ltd.
PY - 2015/4/1
Y1 - 2015/4/1
N2 - We investigate whether segment disclosure influences cost of capital. Improved segment reporting is expected to decrease cost of capital by reducing estimation risk. However, in a competitive environment segment disclosure may also generate uncertainties about future prospects and lead to a larger cost of capital. Asset-pricing tests confirm that segment disclosure is a priced risk factor. Also, segment disclosure reduces ex-ante estimates of cost of equity capital and other measures connected to risk. These results suggest a negative relation between segment disclosure and cost of capital. Our results also show that competition reduces, but does not eliminate, the previous relationship.
AB - We investigate whether segment disclosure influences cost of capital. Improved segment reporting is expected to decrease cost of capital by reducing estimation risk. However, in a competitive environment segment disclosure may also generate uncertainties about future prospects and lead to a larger cost of capital. Asset-pricing tests confirm that segment disclosure is a priced risk factor. Also, segment disclosure reduces ex-ante estimates of cost of equity capital and other measures connected to risk. These results suggest a negative relation between segment disclosure and cost of capital. Our results also show that competition reduces, but does not eliminate, the previous relationship.
KW - Cost of capital
KW - Earnings quality
KW - Forecast error
KW - Segment disclosure
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U2 - 10.1111/jbfa.12106
DO - 10.1111/jbfa.12106
M3 - Article
AN - SCOPUS:84929130719
SN - 0306-686X
VL - 42
SP - 367
EP - 411
JO - Journal of Business Finance and Accounting
JF - Journal of Business Finance and Accounting
IS - 3-4
ER -