This paper examines the relation between information differences across investors (i.e., information asymmetry) and the cost of capital, and establishes that with perfect competition information asymmetry makes no difference. Instead, a firm's cost of capital is governed solely by the average...

The use of evidence and economic analysis in policymaking is on the rise, and accounting standard setting and financial regulation are no exception. This article discusses the promise of evidence-based policymaking in accounting and financial markets as well as the challenges and opportunities...

The use of evidence and economic analysis in policymaking is on the rise, and accounting standard setting and financial regulation are no exception. This article discusses the promise of evidence-based policymaking in accounting and financial markets as well as the challenges and opportunities...

An important question in banking is how strict supervision affects bank lending and in turn local business activity. Supervisors forcing banks to recognize losses could choke off lending and amplify local economic woes. But stricter supervision could also change how banks assess and manage...

In this paper we examine whether and how accounting information about a firm manifests in its cost of capital, despite the forces of diversification. We build a model that is consistent with the CAPM and explicitly allows for multiple securities whose cash flows are correlated. We demonstrate...

In this paper we examine whether and how accounting information about a firm manifests in its cost of capital, despite the forces of diversification. We build a model that is consistent with the CAPM and explicitly allows for multiple securities whose cash flows are correlated. We demonstrate...

This paper examines international differences in firms' cost of equity capital across 40 countries. We analyze whether the effectiveness of a country's legal institutions and securities regulation is systematically related to cross-country differences in the cost of equity capital. We employ...

In this paper, we establish a link between information quality, firms' capital investment decisions and their cost of capital. We characterize asset prices in a market equilibrium framework with perfect competition for firm shares and derive a pricing equation that is equivalent to the CAPM....

An important question in banking is how strict supervision affects bank lending and in turn local business activity. Supervisors forcing banks to recognize losses could choke off lending and amplify local economic woes. But stricter supervision could also change how banks assess and manage...

An important question in banking is how strict supervision affects bank lending and in turn local business activity. Forcing banks to recognize losses could choke off lending and amplify local economic woes, especially after financial crises. But stricter supervision could also lead to changes...