이익투명성 및 정보비대칭과 자기자본비용

초록

The purpose of this paper is to examine whether firms with higher earnings transparency have lower cost of capital in the capital market. We also examine how a relation between earnings transparency and the cost of capital is affected by Korean business group and information asymmetry. Earnings transparency is the degree to which earnings explains a change in the firm value. We measure earnings transparency based on prior studies of Cheng and Subramanyam(2008) and Barth et al.(2013). Financial reporting mitigates information risks of the firm by reducing information asymmetry between the firm and market participants. If accounting information explains a change in the firm value effectively, this can be the evidence of information usefulness and contribute to the efficient allocation of economic resources. Higher transparency in earnings means a better explanation of a change in the firm value. Thus, we expect higher transparency in earnings lower the cost of capital by reducing information risks from uncertainty of business. On the other hand, we expect that investors of the firm with low earnings transparency obtain a private information rather than earnings for financial decisions. Additional expenses can incur in the process of obtaining the private information, and information asymmetry among the market participants can deepen if marginal costs of information for each investor vary. As a result, market participants will ask for an additional premium as the consideration for lower earnings transparency which means higher information risk. Our results show that earning transparency measures are negatively related to the cost of capital. Higher transparency in earnings is significantly associated with lower cost of capital. We also find that firms with business group affiliation have a larger decrease in the cost of capital, while those with higher information asymmetry show a smaller decrease in the cost of capital. Our study is distinguished from prior studies because we empirically analyze theeffect of earnings transparency on cost of capital. In addition, we find empirical evidence that a relation between earnings transparency and the cost of capital is affected by Korean business group and information asymmetry. Overall, our study suggests the importance of earnings transparency in terms of the cost of capital.

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