This paper examines the relationship between two important financial variables (price informativeness, and cost of capital) and information asymmetry, controlling for the total amount of information in the market. In the model, each investor has a private signal. We measure information asymmetry...

Many models in energy economics assess the cost of alternative power generation technologies. As an input, the models require well calibrated assumptions for the cost of capital or discount rates to be used, especially for renewable energy for which the cost of capital differs widely across...

Private information imposes a severe trading disadvantage on uninformed traders while at the same time providing firms with valuable signals for investment adjustment. The two forces have opposite impacts on the cost of capital, and the net effect depends on which force dominates. We show that...

This paper proposes a new discounted cash flows' valuation setup, and derives a general expression for the tax shields' discount rate. This setup applies to any debt policy and any cash flow pattern. It only requires the equality at any time between the assets side and the liabilities side of...

Firm lifecycle theory predicts that the Weighted Average Cost of Capital (WACC) will tend to fall over the lifecycle of the firm (Mueller, 2003, p. 80-81). However, given that previous research finds that corporate governance deteriorates as firms get older (Mueller and Yun, 1998; Saravia, 2014)...

This article proposes an alternative approach to estimating the required rate of return on equity, combining the bond-plus risk-premium approach and the Capital Asset Pricing Model, and tests it using Canadian data. Individual stock risk-premia are classified into groups according to the point...

This article offers a survey of theoretical research on disclosure and the cost of capital. We summarize the current state of the literature and discuss the channels through which information affects the cost of capital. After giving an overview of asset pricing theory, we examine the rationale...

Koziol (2014) derives a simple adjusted WACC equation for firm valuation that takes default probability, possible loss of future tax savings, and the potential costs of financial distress into account. In this note we show that the derivation of the adjusted formula rests on an assumption that,...

I examine whether the time-varying cost of capital is considered in firms' capital budgeting decisions. For this test, I measure the conditional cost of equity, using individual equity option prices. I find that corporate investment responds negatively to fluctuations in the option-implied cost...

Equity option markets can have a dual effect on firm's' cost of debt. On one hand, options attract more informed investors that increase price informativeness and reduce information asymmetries in the market, facilitating firm financing. On the other, by attracting more informed investors that...