Product Market Competition and the Cost of Equity Capital

2013 ◽  
Author(s):  
Chen Chen ◽  
Mary L. Ma
2017 ◽  
Vol 20 (03) ◽  
pp. 1750021 ◽  
Author(s):  
Hsin-Yi Yu ◽  
Li-Wen Chen

In deciding how much customer information to disclose, managers face a tradeoff between the benefits of reducing information asymmetry and the losses of revealing proprietary information. This paper investigates which factors affect the level of ambiguous customer identity disclosure and whether such ambiguous disclosure affects the cost of equity capital. The empirical evidence shows that the proprietary cost is a crucial factor in ambiguous customer identity disclosure. Firms with a higher level of ambiguous customer identity disclosure generate a higher cost of equity capital. Moreover, the higher cost of equity capital is concentrated among firms under imperfect market competition.


2020 ◽  
pp. 0148558X2097194
Author(s):  
Jiajia Fu ◽  
Yuan Ji ◽  
Jiao Jing

Rank and file employees execute firms’ daily operating activities, but prior research rarely examines their importance due to a lack of employee information. In this article, we use a novel data set—company reviews by rank and file employees—to provide evidence on the impact of employee satisfaction on a firm’s cost of equity capital. We find that firms with higher employee satisfaction have a lower cost of equity. Our results are robust to a variety of endogeneity tests and model specifications. We also find that the effect of employee satisfaction is more pronounced for firms with higher risk, greater financial constraints, and higher labor intensity or product market competition where labor is more critical to firm success. Further analysis shows that the negative association between employee satisfaction and the cost of equity is primarily grounded in reviews from current rather than former employees. Finally, we document that firms with high employee satisfaction experience lower systematic and idiosyncratic risk. Overall, our article presents novel evidence on the capital market benefits of higher employee satisfaction, particularly with regard to financing cost reduction.


Sign in / Sign up

Export Citation Format

Share Document