The Experts below are selected from a list of 89136 Experts worldwide ranked by ideXlab platform
Carmelo Reverte - One of the best experts on this subject based on the ideXlab platform.
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the impact of better corporate social responsibility disclosure on the cost of Equity Capital
Corporate Social Responsibility and Environmental Management, 2012Co-Authors: Carmelo ReverteAbstract:In this paper, we provide evidence on the impact of the quality of corporate social responsibility (CSR) reporting on the cost of Equity Capital for a sample of Spanish listed firms. We aim to verify whether firms with higher CSR disclosure ratings enjoy significantly lower costs of Equity Capital, after controlling for the well-known Fama and French risk factors (i.e. beta, market-to-book, and size). Consistent with our main hypothesis, we find a significant negative relationship between CSR disclosure ratings and the cost of Equity Capital. We also obtain that the negative relationship between CSR reporting quality and the cost of Equity Capital is more pronounced for those firms operating in environmentally sensitive industries. Our findings contribute to the debate on whether CSR activities are value-enhancing or value-neutral by showing that improved CSR can enhance firm value by reducing the firm's cost of Equity Capital. This implies that CSR reporting is a part of a firm's communication tools in order to decrease information asymmetries between managers and investors. In other words, mandatory social responsibility reporting is called for in order to produce a more precise valuation of a firm. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.
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The Impact of Better Corporate Social Responsibility Disclosure on the Cost of Equity Capital
Corporate Social Responsibility and Environmental Management, 2011Co-Authors: Carmelo ReverteAbstract:In this paper, we provide evidence on the impact of the quality of corporate social responsibility (CSR) reporting on the cost of Equity Capital for a sample of Spanish listed firms. We aim to verify whether firms with higher CSR disclosure ratings enjoy significantly lower costs of Equity Capital, after controlling for the well-known Fama and French risk factors (i.e. beta, market-to-book, and size). Consistent with our main hypothesis, we find a significant negative relationship between CSR disclosure ratings and the cost of Equity Capital. We also obtain that the negative relationship between CSR reporting quality and the cost of Equity Capital is more pronounced for those firms operating in environmentally sensitive industries. Our findings contribute to the debate on whether CSR activities are value-enhancing or value-neutral by showing that improved CSR can enhance firm value by reducing the firm's cost of Equity Capital. This implies that CSR reporting is a part of a firm's communication tools in order to decrease information asymmetries between managers and investors. In other words, mandatory social responsibility reporting is called for in order to produce a more precise valuation of a firm. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.
Dan S Dhaliwal - One of the best experts on this subject based on the ideXlab platform.
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tax and the cost of Equity Capital an international analysis
2014Co-Authors: Dan S Dhaliwal, Linda K Krull, Oliver Zhen LiAbstract:This paper investigates the association between taxes and the cost of Equity Capital in an international setting that allows for exogenous, cross-sectional variation in corporate and investor tax rates. Using a sample of firms from 33 countries over a 21-year period, we find that the cost of Equity Capital increases in leverage. This effect decreases in the corporate tax rate as well as the personal tax penalty on interest income relative to Equity income, though the significance of this latter result is sensitive to model specification. Further, we find that the cost of Equity Capital increases in tax penalized dividend income and that cross-border Equity investments affect the relation between taxes and the cost of Equity Capital. In sum, we offer further and confirming evidence, in an international setting, that taxes impact the cost of Equity Capital.
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voluntary nonfinancial disclosure and the cost of Equity Capital the initiation of corporate social responsibility reporting
The Accounting Review, 2011Co-Authors: Dan S Dhaliwal, Oliver Zhen Li, Albert H C Tsang, Yong George YangAbstract:ABSTRACT: We examine a potential benefit associated with the initiation of voluntary disclosure of corporate social responsibility (CSR) activities: a reduction in firms’ cost of Equity Capital. We find that firms with a high cost of Equity Capital in the previous year tend to initiate disclosure of CSR activities in the current year and that initiating firms with superior social responsibility performance enjoy a subsequent reduction in the cost of Equity Capital. Further, initiating firms with superior social responsibility performance attract dedicated institutional investors and analyst coverage. Moreover, these analysts achieve lower absolute forecast errors and dispersion. Finally, we find that firms exploit the benefit of a lower cost of Equity Capital associated with the initiation of CSR disclosure. Initiating firms are more likely than non-initiating firms to raise Equity Capital following the initiations; among firms raising Equity Capital, initiating firms raise a significantly larger amount t...
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did the 2003 tax act reduce the cost of Equity Capital
Journal of Accounting and Economics, 2007Co-Authors: Dan S Dhaliwal, Linda K Krull, Oliver Zhen LiAbstract:The Jobs and Growth Tax Relief Reconciliation Act of 2003 (the 2003 Tax Act) drastically reduced shareholder level taxes on Equity income. If shareholder level taxation is an important component of cost of Equity Capital, then cost of Equity should decrease after the 2003 Tax Act. Using the approach of Dhaliwal, Krull, Li, and Moser (2005) that relies on estimates of implied cost of Equity Capital, we find that cost of Equity decreased by about 1.02% after the 2003 Tax Act. We also show that for firms largely held by institutional investors to whom the tax rate reduction does not apply, the decline in the cost of Equity Capital is smaller. These results suggest that the 2003 Tax Act may have achieved its intended goal of lowering the cost of Equity Capital. They also add further evidence to a more fundamental research question, that is, taxes impact valuation.
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Dividend Taxes and Implied Cost of Equity Capital
Journal of Accounting Research, 2005Co-Authors: Dan S Dhaliwal, Linda K Krull, William J. MoserAbstract:We estimate firm-level implied cost of Equity Capital based on recent advances in accounting and finance research and examine the effect of dividend taxes on the cost of Equity Capital. We investigate whether dividend taxes affect firms' cost of Capital by testing the relation between the implied cost of Equity Capital and a measure of the tax-penalized portion of dividend yield, which we define as the product of dividend yield and the dividend tax penalty. The results generally support the dividend tax Capitalization hypothesis. We find a positive relation between the implied cost of Equity Capital and the tax-penalized portion of dividend yield that is decreasing in aggregate institutional ownership, our proxy for tax-advantaged investors. The evidence in this study adds to the understanding of the effect of investor-level taxes on Equity value. Copyright 2005 The Institute of Professional Accounting, University of Chicago.
Henry Huang - One of the best experts on this subject based on the ideXlab platform.
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Management entrenchment and the cost of Equity Capital
Journal of Business Research, 2011Co-Authors: Denton Collins, Henry HuangAbstract:This paper investigates the effect of management entrenchment on the cost of Equity Capital. Using the Bebchuk et al. (2009) entrenchment index data from 1989 through 2002, and using mainly the Ohlson and Juettner-Nauroth (2005) method to estimate the cost of Capital, we find that increases (decreases) in management entrenchment are associated with increases (decreases) in costs of Equity Capital.
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Implications of securities class actions for cost of Equity Capital
International Journal of Law and Management, 2010Co-Authors: Sudheer Chava, C.s. Agnes Cheng, Henry Huang, Gerald J. LoboAbstract:Purpose – The purpose of this paper is to investigate the effects of class action litigation on firms' cost of Equity Capital.Design/methodology/approach – The paper uses three different models to estimate the cost of Equity Capital. To separate the impact of lawsuit filings on the cost of Equity Capital from that of the revelation event, a sample of lawsuits with a long lag between the disclosure events and filing dates was analyzed. Also, a comparison group study was conducted to illustrate the distinct impact of a lawsuit filing on the defendant firm's cost of Equity Capital. Finally, a multivariate analysis was used to examine the factors that affect the magnitude of such impact.Findings – The paper finds that filing of a class action lawsuit results in a significant increase in the defendant firm's cost of Equity Capital incremental to the effect of the disclosure event. Additionally, increases in the cost of Equity Capital after the lawsuit filings are higher when the lawsuits involve generally acce...
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The effect of CEO ownership and shareholder rights on cost of Equity Capital
Corporate Governance: The international journal of business in society, 2009Co-Authors: Henry Huang, Quanxi Wang, Xiaonong ZhangAbstract:Purpose – The purpose of this paper is to investigate whether managerial ownership affects the association between shareholder rights and the cost of Equity Capital.Design/methodology/approach – Prior literature has shown that strong shareholder rights are associated with a lower level of cost of Equity Capital. This paper empirically tests the interaction between managerial ownership and shareholder rights on affecting the cost of Equity Capital, using Gompers et al.'s governance score and Ohlson and Juettner‐Nauroth's estimate of cost of Equity Capital. To mitigate the endogeneity arising from other governance variables affecting both shareholder rights and the cost of Equity Capital, the paper adopts both OLS and two‐stage regression.Findings – The results indicate that managerial ownership aligns managers' interests with those of shareholders, leading to a lesser degree of agency problems and lower cost of Equity Capital. Furthermore, the evidence suggests that managerial ownership could substitute fo...
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Shareholder rights, financial disclosure and the cost of Equity Capital
Review of Quantitative Finance and Accounting, 2006Co-Authors: C. Cheng, Denton Collins, Henry HuangAbstract:This study extends research into whether shareholder rights and disclosures of financial-related attributes are associated with firms' costs of Equity Capital. Using cost-of-Equity-Capital estimates derived from expected earnings growth valuation models, we find that firms with stronger shareholder rights regimes and higher levels of financial transparency are associated with significantly lower costs of Equity Capital. We also find evidence that greater financial disclosure and stronger rights regimes interact in reducing firms' costs of Equity Capital, such that the effect of a high level of one mechanism is minimal when it is combined with a low level of the other. Finally, we document that neither factor dominates the other in their associations, and that there are tradeoffs between disclosure levels and shareholder rights in their influence on firms' implied costs of Equity Capital. Copyright Springer Science + Business Media, LLC 2006
Oliver Zhen Li - One of the best experts on this subject based on the ideXlab platform.
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tax and the cost of Equity Capital an international analysis
2014Co-Authors: Dan S Dhaliwal, Linda K Krull, Oliver Zhen LiAbstract:This paper investigates the association between taxes and the cost of Equity Capital in an international setting that allows for exogenous, cross-sectional variation in corporate and investor tax rates. Using a sample of firms from 33 countries over a 21-year period, we find that the cost of Equity Capital increases in leverage. This effect decreases in the corporate tax rate as well as the personal tax penalty on interest income relative to Equity income, though the significance of this latter result is sensitive to model specification. Further, we find that the cost of Equity Capital increases in tax penalized dividend income and that cross-border Equity investments affect the relation between taxes and the cost of Equity Capital. In sum, we offer further and confirming evidence, in an international setting, that taxes impact the cost of Equity Capital.
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voluntary nonfinancial disclosure and the cost of Equity Capital the initiation of corporate social responsibility reporting
The Accounting Review, 2011Co-Authors: Dan S Dhaliwal, Oliver Zhen Li, Albert H C Tsang, Yong George YangAbstract:ABSTRACT: We examine a potential benefit associated with the initiation of voluntary disclosure of corporate social responsibility (CSR) activities: a reduction in firms’ cost of Equity Capital. We find that firms with a high cost of Equity Capital in the previous year tend to initiate disclosure of CSR activities in the current year and that initiating firms with superior social responsibility performance enjoy a subsequent reduction in the cost of Equity Capital. Further, initiating firms with superior social responsibility performance attract dedicated institutional investors and analyst coverage. Moreover, these analysts achieve lower absolute forecast errors and dispersion. Finally, we find that firms exploit the benefit of a lower cost of Equity Capital associated with the initiation of CSR disclosure. Initiating firms are more likely than non-initiating firms to raise Equity Capital following the initiations; among firms raising Equity Capital, initiating firms raise a significantly larger amount t...
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did the 2003 tax act reduce the cost of Equity Capital
Journal of Accounting and Economics, 2007Co-Authors: Dan S Dhaliwal, Linda K Krull, Oliver Zhen LiAbstract:The Jobs and Growth Tax Relief Reconciliation Act of 2003 (the 2003 Tax Act) drastically reduced shareholder level taxes on Equity income. If shareholder level taxation is an important component of cost of Equity Capital, then cost of Equity should decrease after the 2003 Tax Act. Using the approach of Dhaliwal, Krull, Li, and Moser (2005) that relies on estimates of implied cost of Equity Capital, we find that cost of Equity decreased by about 1.02% after the 2003 Tax Act. We also show that for firms largely held by institutional investors to whom the tax rate reduction does not apply, the decline in the cost of Equity Capital is smaller. These results suggest that the 2003 Tax Act may have achieved its intended goal of lowering the cost of Equity Capital. They also add further evidence to a more fundamental research question, that is, taxes impact valuation.
Yaqi Shi - One of the best experts on this subject based on the ideXlab platform.
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voluntary disclosure and the cost of Equity Capital evidence from management earnings forecasts
Journal of Accounting and Public Policy, 2011Co-Authors: Joung W Kim, Yaqi ShiAbstract:This paper examines the directional effects of management earnings forecasts on the cost of Equity Capital. We find that forecasters of bad news experience a significant increase in the cost of Equity Capital in the month after their disclosure. Conversely, the cost of Equity Capital for good news forecasters does not change significantly in the same period. We also indicate that the magnitude of changes in the cost of Capital for good news forecasters is significantly lower than that for bad news forecasters and non-forecasters, which suggests that investors may view good news forecasts less credible. Finally, we show that the effect of the subsequent earnings announcement on the cost of Equity Capital is preempted by the management forecasts for bad news firms, and that the combined effects of the management earnings forecasts and the earnings announcement are not significant for both good news and bad news forecasters. Our paper contributes to the literature by adding evidence on directional effects of voluntary disclosures and on long-term economic consequences of management earnings forecasts.
