Financial reporting quality, ownership structures and the cost of equity capital
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2019-07-05
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en
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Abstract
This study examines whether ownership structures affect the relationship between financial reporting quality and the cost of equity. We argue that the ownership structure of a firm is interrelated with this relationship, because ownership structures and financial reporting both affect the agency problem within a firm. Managerial shareholding and outside blockholder ownership are expected to be closely related to the agency problem and therefore these shareholders are expected to influence the relation between financial reporting quality and the cost of equity capital. Using a panel data set of 654 individual US-firms, our results show that only managerial blockholder ownership affect the association between financial disclosure reporting quality and the cost of equity. We did not find this effect for outside blockholder ownership, where we only found a direct association between outside blockholder ownership and cost of equity capital. Our findings suggest that the ownership structure of a firm could moderate the effect of financial reporting quality on the cost of equity capital.
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Faculteit der Managementwetenschappen