Corporate disclosure via the internet and implied cost of capital

Abstract

The classical literature of finance establishes arguments that emphasize the negative impact of corporate transparency on the level of return required by investors, or the cost of capital of the firm. However, even as the growing sophistication of technologies at the disposal of listed companies, the corporative communication with its stakeholders is still predominantly supported in the technological device that precedes the Internet. Therefore, this chapter discusses the relationship between voluntary disclosure via corporate websites and the implied cost of equity capital of listed companies. Based on data from more than 300 companies, our main results are three. First, on average, the companies listed on the New Market showed a lower cost of capital. Second, the companies deemed to be the most aggressive showed a higher cost of capital (≈3% points higher than the conservative companies. Third, the metrics of corporate website disclosure did not appear to be related to cost of capital.