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Cambridge Finance

 

Philip G. Berger, Huafeng (Jason) Chen, and Feng Li

Abstract:

We develop a comprehensive and large-sample measure of a firm’s information quality.

The measure is the ratio of firm-specific return variation to firm-specific cash-flow

variation. Empirical evidence supports the validity of our measure. Using this measure,

 

we find that cost of equity capital decreases by about -0.4% on an annual basis

if a firm’s information quality increases by one standard deviation. This is consistent

with the joint hypotheses that (1) firm-specific stock returns contain economic information

s argued by Morck, Yeung, and Yu (2000) and (2) better information quality

can lower the cost of equity.


 

Date: 
Wednesday, 13 February, 2013 - 11:00 to 12:30
Contact name: 
Camilla Burgess
Contact email: 
Event location: 
CJBS, W2.02
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