{"title":"Corporate finance signaling theory: an empirical analysis on the relationship between information asymmetry and the cost of equity capital","authors":"Saeed Fathi, Zahra Mohammadin, Karim Azarbayjani","doi":"10.1057/s41310-024-00261-4","DOIUrl":null,"url":null,"abstract":"<p>The influence of information asymmetry (IA) on the cost of equity capital (COEC) is a critical aspect of managing corporate capital markets. This study delves into the correlation between IA and COEC through an analysis of 24 pairs of proxies. We investigate how six corporate finance signals impact the positive correlation and the consequences of disregarding each signal in establishing this positive link. The results reveal that different corporate finance signals, including dividends, debt ratio, capital expenditure, institutional ownership, ownership concentration, seasoned equity offerings (SEO), and capitalization of retained earnings (CRE), have unique effects on the relationship between the 24 pairs of IA-COEC proxies.</p>","PeriodicalId":45050,"journal":{"name":"International Journal of Disclosure and Governance","volume":null,"pages":null},"PeriodicalIF":2.9000,"publicationDate":"2024-08-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Journal of Disclosure and Governance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1057/s41310-024-00261-4","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"MANAGEMENT","Score":null,"Total":0}
引用次数: 0
Abstract
The influence of information asymmetry (IA) on the cost of equity capital (COEC) is a critical aspect of managing corporate capital markets. This study delves into the correlation between IA and COEC through an analysis of 24 pairs of proxies. We investigate how six corporate finance signals impact the positive correlation and the consequences of disregarding each signal in establishing this positive link. The results reveal that different corporate finance signals, including dividends, debt ratio, capital expenditure, institutional ownership, ownership concentration, seasoned equity offerings (SEO), and capitalization of retained earnings (CRE), have unique effects on the relationship between the 24 pairs of IA-COEC proxies.
期刊介绍：
The International Journal of Disclosure and Governance publishes a balance between academic and practitioner perspectives in law and accounting on subjects related to corporate governance and disclosure. In its emphasis on practical issues, it is the only such journal in these fields. All rigorous and thoughtful conceptual papers are encouraged.
To date, International Journal of Disclosure and Governance has published articles by a former general counsel and a former commissioner of the SEC, practitioners from Cleary Gottlieb, Skadden Arps, Wachtell Lipton, and Latham & Watkins as well as articles by academics from Harvard, Yale and NYU. The readership of the journal includes lawyers, accountants, and corporate directors and managers.
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