Disclosure and Cost of Equity Capital in Emerging Markets

Download or read book Disclosure and Cost of Equity Capital in Emerging Markets written by Alexsandro Broedel Lopes and published by . This book was released on 2008 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we conjecture that the weak association between disclosure and cost of equity capital found in the literature (Botosan, 1997) can be caused by the high level corporate disclosure environment found in the US. We hypothesize that in low level corporate disclosure environments the variability in disclosure practices across firms will be larger than in the US and consequently the marginal effect of voluntary disclosure policies will be higher. Using a newly developed Brazilian Corporate Disclosure Index (BCDI) our results confirm this hypothesis. Disclosure is strongly associated with ex ante cost of equity capital for Brazilian firms. The results are more pronounced for firms with less analyst coverage and low ownership concentration as expected.