Regulation fair disclosure and the cost of equity capital

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

25 Scopus Citations
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Author(s)

  • Zhihong Chen
  • Dan S. Dhaliwal
  • Hong Xie

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)106-144
Journal / PublicationReview of Accounting Studies
Volume15
Issue number1
Publication statusPublished - Mar 2010

Abstract

We examine the effect of Regulation Fair Disclosure (Reg FD) on the cost of equity capital. We find some evidence that (1) the cost of capital declines in the post-Reg FD period relative to the pre-Reg FD period, on average, for a broad cross-section of US firms, (2) the decrease in the cost of capital post Reg FD is mainly for medium and large firms but is insignificant for small firms, and (3) the decrease in the cost of capital post Reg FD is systematically related to firm characteristics indicative of selective disclosure before Reg FD. In contrast, we find little evidence of a decrease in the cost of capital for American Depositary Receipts and US-listed foreign firms, which are legally exempt from Reg FD. Overall, our findings do not support a conclusion in recent studies that the cost of capital has increased post Reg FD and, if anything, suggest the opposite. © Springer Science+Business Media, LLC 2009.

Research Area(s)

  • Cost of capital, Information asymmetry, Regulation fair disclosure, Selective disclosure

Citation Format(s)

Regulation fair disclosure and the cost of equity capital. / Chen, Zhihong; Dhaliwal, Dan S.; Xie, Hong.

In: Review of Accounting Studies, Vol. 15, No. 1, 03.2010, p. 106-144.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review