Review of Quantitative Finance and Accounting

, Volume 27, Issue 4, pp 383–401

The effect of increased disclosure on cost of capital: Evidence from China


DOI: 10.1007/s11156-006-0044-1

Cite this article as:
Zhang, L. & Ding, S. Rev Quant Finan Acc (2006) 27: 383. doi:10.1007/s11156-006-0044-1


This study examined the relationship between disclosure and the cost of capital. Prior studies empirically testing this relationship provided mixed findings, and also raised several concerns, such as the endogeneity of disclosure, the information disclosure environment, and the sample size. This study investigated this relationship based on data from the Chinese capital market where a unique institutional arrangement makes the disclosure exogenous. This unique characteristic, in conjunction with a less stringent information environment and a big sample size, helped address these concerns. Our findings confirmed the negative relationship between disclosure and cost of capital.


DisclosureCost of capitalInformation asymmetryEndogeneity

Copyright information

© Springer Science + Business Media, LLC 2006

Authors and Affiliations

  1. 1.Risk Management and Insurance, Haskayne School of BusinessUniversity of CalgaryAlbertaCanada
  2. 2.Accounting Area, Haskayne School of BusinessUniversity of CalgaryAlbertaCanada