Author: Xiang CaiPublisher:
ISBN:
Category :
Languages : en
Pages : 328
Book Description
Essays on Disclosure Regulation and the Cost of Capital
Author: Xiang CaiEssays on Disclosure, the Institutional Environment and the Cost of Capital
Author: Patricia Ruffing-StraubePublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Mandatory Disclosure Quality, Inside Ownership, and Cost of Capital
Author: John E. CorePublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
This paper examines whether and how inside ownership mediates the relation between disclosure quality and the cost of capital. Both ownership and more transparent reporting have the potential to align incentives between managers and investors thereby reducing systematic risk. Employing a large global sample across 35 countries over the 1990 to 2004 period, we show that country-level disclosure regulation is negatively related to (i) inside ownership, and (ii) firms' implied cost of capital and realized returns. We then introduce ownership into the cost-of-capital model, and also find a negative relation. These relations extend to the systematic component of the cost of capital, estimated from Fama-French portfolio sorts on ownership and disclosure regulation. Thus, while the direct effect of disclosure on cost of capital is negative, the indirect effect via ownership is positive, consistent with disclosure quality and ownership acting as substitutes. Using path analysis to assess the relative magnitude, our estimates suggest that the direct effect of disclosure quality outweighs the indirect effect by a ratio of about five to one.
Does Mandatory Disclosure Reduce the Cost of Capital? Evidence from Bonds
Author: Angela K. GorePublisher:
ISBN:
Category :
Languages : en
Pages : 34
Book Description
I examine whether the cost of debt is lower in states that have mandated the adoption of GAAP disclosure, compared to those with unregulated disclosure. I study municipal bond issuers because many states have unregulated disclosure, while others require GAAP, allowing an examination of the value of disclosure regulation in a relatively controlled experiment. Using a sample of municipal-level yield data, I find that mandatory disclosure is associated with a reduction of 15 basis points. Further, I find that the reduction in bond yields is the greatest among those organizations with relatively higher information asymmetry: those issuing unrated bonds, and small municipalities. In particular, unrated issues in GAAP states are associated with a yield reduction of 34 basis points, and small municipalities a yield reduction of 21 basis points. From this evidence, it is tempting to infer that municipalities benefit from mandatory disclosure, without consideration of the costs. However, prior research finds that the imposition of mandatory disclosure changes managers' use of alternate mechanisms, such as bond insurance, that also reduce the cost of debt. In further analysis, I find evidence consistent with regulation constraining the use of bond insurance among municipalities with relatively higher levels of information asymmetry. I conclude that disclosure regulation both provides benefits and imposes costs.
Essays on the Outcomes, Incentives, and Regulations of Disclosure
Author: Joshua Alan LeePublisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages : 163
Book Description
My dissertation examines the outcomes, incentives, and regulations surrounding the voluntary and mandatory disclosure of information by public firms. It contains three chapters. Using earnings conference calls as a prevalent setting to examine voluntary disclosure incentives and outcomes, Chapter 1 examines the market response to firms' scripting answers to questions they expect to receive during the question and answer (Q & A) session of the conference call. I hypothesize that firms script their Q & A responses when future performance is poor to avoid disclosing information that can be used in litigation against the firm or as a means of withholding bad news from investors. I develop a measure of Q & A scripting and find evidence that investors react negatively to scripted Q & A.I also find negative returns in the quarter following scripted Q & A suggesting that investors do not fully incorporate the negative signal into the stock price at the time of the conference call. Lastly, I provide evidence of a negative association between Q & A scripting and unexpected earnings for the two quarters following the conference call, suggesting that the negative reaction to scripted calls is warranted given the realization of negative future outcomes. Chapter 2 then focuses on the incentives for firms to provide disclosures prior to raising capital in seasoned equity offerings. Seasoned equity offerings involve significant information asymmetry between the firm and potential investors. Firms can reduce information asymmetry and the cost of obtaining financing by disclosing detailed plans for how the offering proceeds will be used to generate a return for investors. However, disclosure of forward-looking strategic information is costly. A policy of full disclosure can allow competitors to obtain and use proprietary information to the detriment of the firm or can preclude investors from investing in the offering if they disagree with the chosen strategy of the manager. I argue that managers are likely to disclose only if the expected benefits of disclosure outweigh the expected costs. I expect the benefits of disclosure are the lowest for high-ability managers. High-ability managers can credibly convey firm value at the offering date and enjoy lower levels of information asymmetry. Low-ability managers, on the other hand, cannot credibly convey the value of the offering resulting in high levels of information asymmetry at the time of the offering. I provide evidence that low-ability managers are more likely to disclose plans for the offering proceeds than high-ability managers to reduce information asymmetry and the cost of obtaining funds. Finally, Chapter 3 examines the effect of regulation on the disclosure and reporting decisions of banking institutions. All public firms, including banks, must register their securities with the Securities and Exchange Commission (SEC) if they meet certain thresholds. Registered firms must disclose financial information and adhere to strict reporting requirements. These firms are also subject to regulations such as the Sarbanes Oxley Act, which requires costly attestation of the adequacy of the firm's internal controls. In 2012, the Jumpstart Our Business Startups (JOBS) Act loosened the requirements for banks to register with the SEC. The JOBS Act raised the previous registration threshold of 300 shareholders of record to 1,200 shareholders of record, allowing banks with between 300 and 1,200 shareholders of record the opportunity to deregister their securities without incurring the costs of reducing their shareholders of record to be below the prior threshold. Within the first six months following the JOBS Act, 89 banks deregistered from the SEC, which is large given that only 142 banks deregistered over the ten years prior to the Act. We hypothesize that banks deregister to take advantage of private benefits of control. We find that banks deregistering after the Act have significantly lower institutional ownership, more insider trading and insider loans, and do not display significantly lower asset growth. In contrast to positive returns during pre-JOBS Act deregistration announcements, announcement returns for post-JOBS Act deregistrations are insignificant. By reducing the costs of deregistration, the Act likely allowed banks to capture private benefits while increasing the attractiveness of deregistration for higher growth banks.
Essays on Capital Markets and Corporate Disclosure
Author: Danil A. BoriloPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
This thesis studies how a firm's disclosure decisions are affected by the interaction between prevailing financial reporting regulation and managerial incentives. Chapter 1 summarizes studies related to this thesis. I focus on rules that require a firm to issue regular financial statements. As a result, the release of some information about a firm's performance and financial condition is inevitable. However, since financial statements do not fully reflect all value-relevant information, a firm's manager can still affect the interpretation of this information via voluntary disclosure. In Chapter 2, I study how reputational concerns of a firm's manager affect her voluntary disclosure decisions. I show that interpretation of both the firm's report and voluntarily disclosed information depend on the timing of the disclosure relative to disclosures made by other firms in the same industry. In Chapter 3, I consider the case when private information of the firm's manager cannot be credibly communicated to outside investors and a mandatory financial report is the only available information channel about firm value. As a result, the noisiness of a financial report will lead investors to overvalue some firms and undervalue others. I show that allowing for misreporting can increase social welfare if a firm must rely on external capital in order to finance its investment opportunities. Overall, my results emphasize the importance of taking into account strategic disclosure decisions of managers for regulators, investors, and analysts.
Accounting Disclosure and Real Effects
Author: Chandra KanodiaPublisher: Now Publishers Inc
ISBN: 1601980620
Category : Business & Economics
Languages : en
Pages : 105
Book Description
Kanodia presents a new approach to the study of accounting measurement that argues that how firms' economic transactions, earnings, and capital flows are measured and reported to the capital markets has substantial effects on the firms' real decisions and on the allocation of resources.
The Logic of Securities Law
Author: Nicholas L. GeorgakopoulosPublisher: Cambridge University Press
ISBN: 1108146171
Category : Law
Languages : en
Pages : 215
Book Description
This book opens with a simple introduction to financial markets, attempting to understand the action and the players of Wall Street by comparing them to the action and the players of main street. Firstly, it explores the definition of a security by its function, the departure from the buyer beware environment of corporate law and the entrance into the seller disclose environment of securities law. Secondly, it shows that the cost of disclosure rules is justified by their capacity to combat irrationalities, fads, and panics. The third section explains how the structure of class actions is designed to improve deterrence. Next it explores the economic harm from insider trading and how the law fights it. In sum, the book shows how all these parts of securities law serve the virtuous cycle from liquidity to accurate prices and more trading and how the great recession showed that our securities regulation reacted mostly adequately to the crisis.
Cost of Capital in Litigation
Author: Shannon P. PrattPublisher: John Wiley & Sons
ISBN: 0470944919
Category : Business & Economics
Languages : en
Pages : 323
Book Description
Cost of Capital in Litigation addresses cost of capital issues in litigation and discusses major decisions, highlighting how to avoid errors that have often been made by experts. The book helps the attorney and valuation expert understand the decisions within the context of the theory of cost of capital and includes a chapter on cross-examining experts on cost of capital issues. Throughout, there are citation to relevant material and cross-reference to Cost of Capital: Applications and Examples, Fourth Edition.
Stanford Law Review: Volume 64, Issue 5 - May 2012
Author: Stanford Law ReviewPublisher: Quid Pro Books
ISBN: 1610279344
Category : Law
Languages : en
Pages : 250
Book Description
A leading law journal features a digital edition as part of its worldwide distribution, using quality ebook formatting. The May 2012 issue of the Stanford Law Review contains studies of law, economics, and social policy by recognized scholars on diverse topics of interest to the academic and professional community. Contents for this issue include: "The City and the Private Right of Action," by Paul A. Diller "Securities Class Actions Against Foreign Issuers," by Merritt B. Fox "How Much Should Judges Be Paid? An Empirical Study on the Effect of Judicial Pay on the State Bench," by James M. Anderson & Eric Helland Note: "How Congress Could Reduce Job Discrimination by Promoting Anonymous Hiring," by David Hausman In the ebook edition, all the footnotes, graphs, and tables of contents (including those for individual articles) are fully linked, properly scalable, and functional; the original note numbering is retained. Also, the URLs in notes are active; and the issue is properly formatted for ereaders and apps.