Management earnings forecast disclosure policy and the cost of equity capital

Stephen P. Baginski () and Kenneth C. Rakow
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Stephen P. Baginski: University of Georgia
Kenneth C. Rakow: Saint Xavier University

Review of Accounting Studies, 2012, vol. 17, issue 2, No 3, 279-321

Abstract: Abstract We examine the relation between management earnings forecast disclosure policy and the cost of equity capital in a cross-section of 1,355 firms over a 4-year post-Regulation Fair Disclosure period (2001 through 2004). We find evidence of a negative association between the quality of management earnings forecasting policy and cost of equity capital, and we document that the strength of the association is greater for firms with higher disclosure costs and for firms with more relevant quarterly management earnings forecasts. Our results are robust to the use of multiple methods to address both endogeneity and the measurement error in firm-specific estimates of implied cost of equity capital.

Keywords: Cost of equity capital; Voluntary disclosure; Management earnings forecasts (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/s11142-011-9173-4

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