This paper examines the effect of accounting restatements on a firm’s cost of equity capital. We show that, on average, accounting restatements lead to both decreases in expected future earnings and increases in the firm’s cost of equity capital. Depending on the model used, relative percentage increases in the cost of equity capital average between 7 and 19% in the month immediately following ...

This paper estimates the implied cost of equity for Canadian and U.S. firms using a methodology based on the dividend discount model and utilizing firms’ current stock price and analysts’ forecasted earnings. We find that firm size and firm stock liquidity are negatively related to cost of equity, while greater firm financial leverage and greater dispersion in analysts’ earnings forecasts are a...

Hundreds of billions of dollars have been spent in homeland security since September 11, 2001. Many mathematical models have been developed to study strategic interactions between governments (defenders) and terrorists (attackers). However, few studies have considered the tradeoff between equity and efficiency in homeland security resource allocation. In this article, we fill this gap by develo...

We provide evidence that associations between realized returns and common risk proxies (factor betas and implied cost of equity estimates) vary with properties of the sample returns distribution used to estimate those associations. We consider two forms of non-random sampling from a reference distribution of realized returns for all CRSP firms with at least 12 consecutive monthly returns during...

In this paper, we examine whether the presence of multiple large shareholders alleviates firm’s agency costs and information asymmetry embedded in ultimate ownership structures. We extend extant corporate governance research by addressing the effects of multiple large shareholders on firm’s cost of equity capital—a proxy for firm’s information quality. Using data for 1,165 listed corporations f...

We explore a large sample of analysts' estimates the cost equity capital (CoE) to evaluate their usefulness as expected return proxies (ERP). find that CoE are significantly related firm's beta, size, book-to-market ratio, leverage, and idiosyncratic volatility but not other risk proxies. Even after controlling for popular predictors, incrementally predict future stock returns. This predictive ...

capital asset pricing, as one of the basic theories in finance and investment area, develop a model for estimation of expected rate of return and equity cost of capital. this model has many applications in the field of finance. one of anomalies in the capital asset pricing model is the value premium that its proponents believe this risk premium is compensation for a risk not mentioned in origin...

This study examines the contracting benefits of accounting conservatism on international debt and equity markets. Results show that firms domiciled in countries with more conservative financial reporting systems have significantly lower cost of debt and equity capital, after controlling for differences in legal institutions and securities regulations. I use one-year-ahead interest rate to measu...