Does graph disclosure bias reduce the cost of equity capital?

Flora Mui¤o V zquez and Marco Trombetta ()
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Flora Mui¤o V zquez: Universidad Carlos III de Madrid
Marco Trombetta: ?Universidad Carlos III de Madrid

No 39, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: Research on disclosure and capital markets focuses primarily on the amount of information provided but pays little attention to the presentation format of this information. This paper examines the impact of graph utilization and graph quality (distortion) on the cost of equity capital, controlling for the interaction between disclosure and graph distortion. Despite the advantages of graphs in communicating information, our results show that graphutilization does not have a significant impact on users' decisions. However we observe a significant (negative) association between graph distortion and the ex-ante cost of equity. This effect though, disappears if we use realised returns as a measure of ex-post cost of equity. Moreover, we find that disclosure and graph distortion interact so that the impact of disclosure on the cost of capital depends on graph integrity. For low level of overall disclosure, graph distortion reduces the ex-ante cost of equity. However for high level of disclosure graph distortion increases the ex-ante cost of equity.

Keywords: ?equity capital; graphs (search for similar items in EconPapers)
JEL-codes: G14 M41 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2007-04
New Economics Papers: this item is included in nep-acc and nep-cfn
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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0039

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