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008			241128b |||||||| |||| 00| 0 eng d
022			_a0312-8962
040			_aMSU _bEnglish _cMSU _erda
050	0	0	_aHD31 AUS
100	1		_aClinch, Greg _eauthor
245	1	0	_aDisclosure quality, diversification and the cost of capital _ccreated by Greg Clinch
264	1		_aLos Angeles: _bSage, _c2013.
336			_2rdacontent _atext _btxt
337			_2rdamedia _aunmediated _bn
338			_2rdacarrier _avolume _bnc
440			_aAustralian journal of management _vVolume 38, number 3.
520	3		_aBased on a stylized infinite-period and multi-asset model of a securities market, I discuss several aspects of the link between disclosure quality and cost of capital, with a particular focus on how diversification influences this link. I first show that because investors have finite horizons and thus face price risk, disclosure plays a role in determining ex ante cost of capital in such a setting, contrary to the result of Christensen et al. ((2010) Information and the cost of capital: An ex ante perspective. Accounting Review 83: 817–848). With respect to diversification, I highlight the role of three aspects of a ‘large economy’ that influence how disclosure quality affects cost of capital: (1) the number of firms across which risk is distributed; (2) the number of investors among whom this risk is shared; and (3) the number of information signals (disclosures) available to investors from which to extract information. Finally, I extend the model to include the effects of non-rational traders who follow a simple trading heuristic and show that this results in an additional disclosure-contingent factor in equilibrium price that does not diversify away under fairly general conditions.
650			_aCost of capital _vDisclosure quality _xDiversification
856			_uhttps://doi.org/10.1177/0312896213510700
942			_2lcc _cJA
999			_c168434 _d168434