The economic consequences of increased disclosure

  • Economic theory suggests that a commitment by a firm to increased levels of disclosure should lower the information asymmetry component of the firm’s cost of capital. But whi le the theory is compelling, so far empirical results relating increased levels of disclosure to measurable economic benefits have been mixed. One explanation for the mixed results among studies using data from firms publicly registered in the US is that, under current US reporting standards, the disclosure environment is already rich. In this paper, we study German firms that have switched from the German to an international reporting regime (IAS or US -GAAP), thereby committing themselves to increased le vels of disclosure. We show that proxies for the information asymmetry component of the cost of capital for the switching firms, namely the bid-ask spread and trading volume, behave in the predicted direction compared to firms employing the German reporti ng regime.

Download full text files

Export metadata

Author:Christian LeuzORCiDGND, Robert E. Verrecchia
Parent Title (German):Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 41
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (41)
Publisher:Johann-Wolfgang-Goethe-Universität, Frankfurt am Main, Fachbereich Wirtschaftswissenschaften
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2000
Year of first Publication:1999
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2020/08/31
Tag:Cost of Capital; Disclosure; IAS; International Accounting; US GAAP
GND Keyword:Deutschland; Publizitätspflicht; Asymmetrische Information; Kapitalkosten; International Financial Reporting Standards; International Accounting Standards; Kapitalmarkteffizienz; Schätzung
Issue:Revised: June 2000
Page Number:52
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht