The Reaction of Firm Ex Ante Cost of Equity Capital to Initiation and Resolution of Shareholder Lawsuits

2018 ◽  
Author(s):  
William J. Moser
Keyword(s):  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Ex Ante

Pengaruh Kualitas Corporate Governance Terhadap Cost Of Equity Perusahaan Manufaktur Di Indonesia

2018 ◽  
Vol 13 (1) ◽  
Author(s):  
Fiki Kartika
Keyword(s):  
Corporate Governance ◽  
Risk Premium ◽  
Manufacturing Industry ◽  
Equity Capital ◽  
Manufacturing Companies ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Ex Ante ◽  
The Cost ◽  
The Impact

This research aims to determine the impact of Good Corporate Governance (GCG) on the cost of equity for manufacturing companies in Indonesia. The sampling technique uses purposive sampling, namely companies listed on the Indonesia Stock Exchange. The analysis was carried out in the Manufacturing industry sector in 2013 - 2015. The GCG index was measured using five dimensions adopted from Black et al. (2003) and Cost of Equity is measured by the ex ante cost of equity capital using the Price Earning Growth (PEG) proxy. The reason for using ex ante cost of equity capital is ex-ante is more describing the role of investors in seeing the risk of a company. The results of this study indicate that GCG negatively affects on the cost of equity. GCG limits managerial opportunism and reduces agency conflicts between owners and agents. Therefore, shareholders are willing to accept a lower risk premium, effectively reducing equity costs.

Litigation Risk and the Financial Reporting Credibility of Big 4 versus Non-Big 4 Audits: Evidence from Anglo-American Countries

2004 ◽  
Vol 79 (2) ◽  
pp. 473-495 ◽  
Author(s):  
Inder K. Khurana ◽  
K. K. Raman
Keyword(s):  
Financial Reporting ◽  
Audit Quality ◽  
Equity Capital ◽  
Brand Name ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Big 4 ◽  
Ex Ante ◽  
Anglo American ◽  
The U.S

Prior research suggests that Big 4 auditors provide higher quality audits in the U.S. in order to protect the firm's brand name reputation and to avoid costly litigation. In this study, we examine whether the perceived higher quality of a Big 4 audit is related to auditor litigation exposure or to reputation concerns. Specifically, we utilize an estimable proxy for financial reporting credibility—the ex ante cost of equity capital—to examine whether Big 4 auditors are perceived as providing higher quality audits (relative to non-Big 4 auditors) in the U.S., and in the less litigious (but economically similar) environments in other Anglo-American countries during the 1990–99 period. We find that a Big 4 audit is associated with a lower ex ante cost of equity capital for auditees in the U.S. but not in Australia, Canada, or the U.K. Our findings suggest that it is litigation exposure rather than brand name reputation protection that drives perceived audit quality.

Audit Partner Tenure and Cost of Equity Capital

2012 ◽  
Vol 32 (1) ◽  
pp. 183-202 ◽  
Author(s):  
Masoud Azizkhani ◽  
Gary S. Monroe ◽  
Greg Shailer
Keyword(s):  
Equity Capital ◽  
Data Availability ◽  
Future Research ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Omitted Variables ◽  
Big 4 ◽  
Sensitivity Tests ◽  
Ex Ante ◽  
Nonlinear Relation

SUMMARY We examine whether audit engagement partner tenure and rotation affect investors' perceptions, as proxied by the ex ante cost of equity capital. We find that partner tenure has a nonlinear relation with the ex ante cost of equity capital for non-Big 4 audit engagements prior to the introduction of partner rotation requirements, and that the imputed gains from partner tenure appear similar to the imputed gains of having a Big 4 auditor. Consistent with the tenure results, we also find that partner rotation is associated with increased ex ante cost of equity capital. Our results are very robust to a variety of sensitivity tests and raise important questions for future research. It is not known to what extent investors or analysts are aware of the audit partner's identity or pay attention to audit partner tenure; if investors or analysts do not consider partner tenure, future research may identify omitted variables that have the same nonlinear relationship with the ex ante cost of capital that we observe for non-Big 4 audit partner tenure. JEL Classifications: M42; M48. Data Availability: The data used are from public sources identified in the manuscript.

The relation between accounting information-based firm risk proxies and cost of equity capital across countries

2015 ◽  
Vol 27 (1) ◽  
pp. 69-94 ◽  
Author(s):  
Tony Kang ◽  
Mark Kohlbeck ◽  
Yong Yoo
Keyword(s):  
Financial Reporting ◽  
Capital Market ◽  
Accounting Information ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Firm Risk ◽  
Content Type ◽  
Ex Ante ◽  
Legal Infrastructure

Purpose – The purpose of this paper is to investigate international variability in the pricing of accounting information using ex ante cost of equity capital estimates. Prior literature shows that financial statement amounts are relevant for investor decisions only when there is appropriate economic and legal infrastructure (Ball, 2001). Design/methodology/approach – Accrual quality and accounting loss are focussed upon as indicators of firm risk in financial statements. Findings – The evidence suggests that accounting information is factored into ex ante cost of equity capital in countries with strong economic and legal infrastructures but not in those with weak infrastructures. Findings support Ball’s notion that the role financial reporting plays in a capital market depends on the strength of economic and legal infrastructure. Originality/value – Findings support Ball’s notion that the role financial reporting plays in a capital market depends on the strength of economic and legal infrastructure.

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