Endogeneity and the Dynamics of Voluntary Disclosure Quality
Author | : Florian Eugster |
Publisher | : |
Total Pages | : 66 |
Release | : 2018 |
ISBN-10 | : OCLC:1304494210 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Endogeneity and the Dynamics of Voluntary Disclosure Quality written by Florian Eugster and published by . This book was released on 2018 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research on the effects of voluntary disclosure quality on the cost of equity capital is often plagued by endogeneity concerns. I use a dynamic panel system GMM estimator to minimize these concerns by incorporating the dynamic nature of voluntary disclosure choices. The dynamic panel system GMM approach provides internal instruments from the firm's history that directly address endogeneity arising from unobserved heterogeneity and simultaneity. By using hand-collected voluntary disclosure scores, I examine the dynamic relation between voluntary disclosure quality and the cost of equity capital in a panel over 10 years. My results suggest that the empirical relation between voluntary disclosure quality and the cost of equity capital becomes insignificant after controlling adequately for potential dynamic endogeneity, simultaneity, and unobserved heterogeneity. This result is robust to an extension to the U.S. market.