Investment Forecast Disclosure and the Cost of Equity Capital : Evidence from the Treatment Effect Estimates Model

This study examines the economic consequences of voluntary disclosures for investment forecasts. Using Japanese data, I examine whether voluntary disclosure of management forecasts of capital investments and research and development investments is related to the cost of capital in the same and subsequent years. The results indicate that firms that disclose investment forecasts realize a greater reduction in the cost of capital in the same and subsequent accounting periods than firms that do not disclose. Another finding is that the initial investment forecast disclosures affect the reduction in the cost of capital in the year subsequent to the initial disclosure. This suggests that information effects of investment forecasts on the cost of capital appear over time