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Do IFRS disclosure requirements reduce the cost of capital? Evidence from Australia
Author(s) -
Saha Amitav,
Bose Sudipta
Publication year - 2021
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12744
Subject(s) - cost of capital , accounting , business , international financial reporting standards , equity (law) , capital requirement , weighted average cost of capital , sample (material) , historical cost , equity capital , capital (architecture) , cost of equity , implicit cost , debt , capital market , fair value , finance , economics , financial capital , total cost , capital formation , law , history , economic growth , human capital , chemistry , archaeology , microeconomics , profit (economics) , chromatography , political science , incentive
We examine the association between the disclosure requirements of the International Financial Reporting Standards (IFRS) and the cost of capital for a sample of Australian firms. We find that these disclosure requirements have a negative association with the cost of capital. The interpretation is that firms with a higher level of IFRS disclosure have a lower cost of capital. Further analysis shows that IFRS disclosure requirements are negatively related to the cost of debt and equity capital. Our findings contribute to the debate on the relative costs and benefits of IFRS disclosure requirements and have important implications for standard setters, regulators and users of financial statements.