This paper examines the liquidity, Tobin's Q, and cost of equity effects from voluntary and mandatory IFRS adoption. In contrast to prior work, we focus on the firm level heterogeneity in the economic consequences, recognising that the level of uncertainty avoidance (UAI) in a country will...

Are all covenants equally effective at reducing the bondholder-shareholder conflict? Examining the most frequently used bond covenants, we document that four out of 24 restrictions are associated with significantly higher bankruptcy risk. The use of these Default Indicating covenants can be...

We present the derivation of cost of capital under the assumption of risky tax shields discounted with the cost of levered equity. We show that the formulation is consistent and is derived from basic financial principles. This formulation is valid for finite cash flows and non growing...

We hypothesize that earnings downside risk, capturing the expectation for future downward operating performance, contains distinct information about firm risk and varies with cost of capital in the cross section of firms. Consistent with the validity of the earnings downside risk measure, we...

This study investigates the relation between customer concentration and a supplier's cost of equity capital. We hypothesize that a more concentrated customer base increases a supplier's risk, which results in a higher cost of equity. Our results show a positive association between customer...

This paper examines the effect of income smoothing on information uncertainty, stock returns, and cost of equity. I show that income smoothing through both total accruals and discretionary accruals tends to reduce firms' information uncertainty, as measured by stock return volatility, analyst...

This article applies a unique accruals measure to empirically test whether accruals quality affects the cost of capital for property-liability insurers. We utilize insurer loss reserve errors to accurately measure the quality of accruals. This measure, as well as conventional accruals measures,...

We explore how risk aversion affects optimal capacity and pricing decisions within the economic setting of Banker and Hughes (1994). A risk averse firm invests in fixed capacity and sets a product price, but can also purchase spot capacity at higher unit cost. Initial capacity and price are set...

Especially with the evaluation of non-listed (medium-sized) companies, the following problems and significant restrictions pertaining to the applicability of the CAPM must be taken into account when determining cost of capital. 1. Homogeneity of expectations and planning consistency. Given the...