Cost of Equity Capital and Disclosure Level in Brazilian Companies

This paper investigates and correlates disclosure level with cost of capital for Brazilian companies. Theory says that better disclosure results in reduced cost of capital, and prior studies in other countries confirm the theory, but there are reasons to believe that the same effect is not observed in the Brazilian market. The research took into account data obtained from Economatica database, referring to 222 enterprises listed in the Stock Exchange. The conclusion drawn from such data shows that, as far as the Brazilian market goes, disclosure level does not influence the cost of capital. These findings require further detailed investigation. Besides, two other results were found, which not only are contrary to the expectations originated from the theory, but also reinforce findings from other existing research: bigger enterprises offer higher return than smaller enterprises, and corporate governance practices have not resulted in a change in cost of capital.