Disclosure, conservatism and the cost of equity capital: A review of the foundation literature

Artiach, Tracy C. and Clarkson, Peter M. (2011) Disclosure, conservatism and the cost of equity capital: A review of the foundation literature. Accounting and Finance, 51 1: 2-49. doi:10.1111/j.1467-629X.2010.00387.x

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Author Artiach, Tracy C.
Clarkson, Peter M.
Title Disclosure, conservatism and the cost of equity capital: A review of the foundation literature
Journal name Accounting and Finance   Check publisher's open access policy
ISSN 0810-5391
Publication date 2011-03
Year available 2010
Sub-type Article (original research)
DOI 10.1111/j.1467-629X.2010.00387.x
Volume 51
Issue 1
Start page 2
End page 49
Total pages 48
Editor Robert Faff
Place of publication Oxford
Publisher Blackwell
Collection year 2011
Language eng
Subject 1501 Accounting, Auditing and Accountability
1502 Banking, Finance and Investment
Abstract In this review piece, we survey the literature on the cost of equity capital implications of corporate disclosure and conservative accounting policy choice decisions with the principle objective of providing insights into the design and methodological issues, which underlie the empirical investigations. We begin with a review of the analytical studies most typically cited in the empirical research as providing a theoretical foundation. We then turn to consider literature that offers insights into the selection of proxies for each of our points of interest, cost of equity capital, disclosure quality and accounting conservatism. As a final step, we review selected empirical studies to illustrate the relevant evidence found within the literature. Based on our review, we interpret the literature as providing the researcher with only limited direct guidance on the appropriate choice of measure for each of the constructs of interest. Further, we view the literature as raising questions about both the interpretation of empirical findings in the face of measurement concerns and the suitability of certain theoretical arguments to the research setting. Overall, perhaps the message which is most clear is that one of the most controversial and fundamental issues underlying the literature is the issue of the diversifiability or nondiversifiability of information effects.
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Early View (Articles online in advance of print) online: 8 NOV 2010

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2011 Collection
UQ Business School Publications
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Citation counts: TR Web of Science Citation Count  Cited 10 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 20 times in Scopus Article | Citations
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Created: Tue, 16 Nov 2010, 10:46:24 EST by Karen Morgan on behalf of UQ Business School