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Information disclosure by industry and the cost of equity: Evidence from a quasi-natural experiment in China

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  • Zhao, Ling
  • Huang, Hao

Abstract

Based on manually collected data, this study examines the impact of information disclosure by industry (IDI) on firms’ cost of equity. Using a staggered difference-in-difference design, we find that the cost of equity of the firms that adopt IDI regulations is decreased. The results are robust when we address endogeneity and use alternative measurements of the cost of equity. Moreover, this effect is more pronounced in firms with higher individual ownership and located in areas with weak legal environments. The path analysis results show that the enactment of IDI regulations reduces the cost of equity by improving information transparency and reducing the agency cost of management.

Suggested Citation

  • Zhao, Ling & Huang, Hao, 2024. "Information disclosure by industry and the cost of equity: Evidence from a quasi-natural experiment in China," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 196-212.
    • Handle: RePEc:eee:reveco:v:89:y:2024:i:pa:p:196-212
    DOI: 10.1016/j.iref.2023.07.094
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    More about this item

    Keywords

    Information disclosure by industry; Cost of equity; Legal enforcement; Agency cost;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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