Journal of Accounting and Management Information Systems (JAMIS)

Disclosure quality, disclosure regulations and the cost of capital

24/2008 ,   p7..21


Keywords:   disclosure quality, disclosure regulations, cost of capital, benefits of IAS/IFRS adoption in Romania


The quality of corporate financial disclosures has long been acknowledged as an important determinant of companies’ cost of capital. High quality accounting and disclosure regulations are designed to mediate the relationship between disclosure quality and cost of capital and, allegedly, increase the former to diminish the later. However, such relationship is not well established empirically, among the posited problems being the quantification of disclosure levels (e.g. Botosan, 1997) and disclosure quality, or the country-specific institutional factors that subtly affect the cost of capital irrespective of disclosure regulations (Hail & Leuz, 2003). The failure of international literature to reach common grounds on this topic urges for theoretical and methodological clarification. Therefore, the purpose of this study is twofold. First, it reviews relevant international literature to structure theoretical and methodological features and possibly detect sources of disagreement within the field. Second, the paper considers the impact of IAS/IFRS regulations on the cost of capital of Romanian companies. Overall, the aim is to identify relevant variables and proper proxies, detect the best research design, data type and data collection methods to support future conclusive research.