The endogeneity bias in the relation between cost-of-debt capital and corporate disclosure policy

European Accounting Review

Volumn 14, Issue 4, 2005, Pages 677-724

  Nikolaev, Valeri ^a   van Lent, Laurence ^a  

^a TILBURG UNIVERSITY   (Netherlands)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 85044998265     PISSN: 09638180     EISSN: 14684497     Source Type: Journal    
DOI: 10.1080/09638180500204624     Document Type: Article

References (99)

1. Aboody, D., and Kasznik, R., 2000. CEO stock option awards and the timing of corporate voluntary disclosures. Journal of Accounting and Economics, 29 (1): 73–100.
2. Amihud, Y., and Mendelson, H., 1986. Asset pricing and the bid–ask spread. Journal of Financial Economics, 17: 223–249.
3. Ashenfelter, O., 1978. Estimating the effect of training programs on earnings. Review of Economics and Statistics, 60: 47–57.
4. Ashenfelter, O., and Kruger, A., 1994. Estimates of the economic return to schooling from a new sample of twins. American Economic Review, 84: 1157–1173.
5. Association for Investment Management and Research, Corporate Information Committee. 1997. An Annual Review of Corporate Reporting Practices 95/96, Charlottesville, VA: AIMR.
6. Bagnani, E., 1994. Managers, owners, and the pricing of risky debt: an empirical analysis. Journal of Finance, 49: 453–478.
7. Barry, C., and Brown, S., 1985. Differential information and security market equilibrium. Journal of Financial and Quantitative Analysis, 20: 407–422.
8. Bartov, E., 2000. Investor sophistication and patterns in stock returns after earnings announcements. The Accounting Review, 75 (1): 43–63.
9. Ben-Porath, Y., 1973. Labor-force participation rates and the supply of labor. The Journal of Political Economy, 81 (3): 697–704.
10. Bhojraj, S., and Sengupta, P., 2003. The effect of corporate governance mechanisms on bond ratings and yields: the role of institutional investors and outside directors. The Journal of Business, 76 (3): 455–475.
11. Botosan, C. A., 1997. Disclosure level and the cost of equity capital. The Accounting Review, 72 (3): 323–350.
12. Botosan, C. A., and Frost, C., 1998. “ Regulation, disclosure and market liquidity ”. Washington University. Working Paper
13. Botosan, C. A., and Plumlee, M. A., 2002. A re-examination of disclosure quality and the expected cost of capital. Journal of Accounting Research, 40 (1–3): 21–40.
14. Campbell, J., and Taksler, G., 2003. Equity volatility and corporate bond yields. Journal of Finance, 58 (6): 2321–2350.
15. Chamberlain, G., 1978. Omitted variable bias in panel data: estimating the returns to schooling. Annales de l'INSEE, 30 (1): 49–82.
16. Chenhall, R., and Moers, F., 2004. “ The issue of endogeneity within theory-based, quantitative management accounting research ”. Monash University. Working Paper
17. Cohen, D. A., 2003. “ Quality of financial reporting choice: determinants and economic consequences ”. Northwestern University. Working Paper
18. Core, J. E., 2001. A review of the empirical disclosure literature: discussion. Journal of Accounting and Economics, 31: 441–456.
19. Demski, J., 2004. Endogenous expectations. The Accounting Review, 79 (2): 519–539.
20. Diamond, D., and Verrecchia, R., 1991. Disclosure, liquidity, and the cost of capital. Journal of Finance, 46: 1325–1360.
21. Doidge, C., 2004. U.S. cross-listings and the private benefits of control: evidence from dual-class firms. Journal of Financial Economics, 72: 519–553.
22. Dye, R. A., 1985. Disclosure of nonproprietary information. Journal of Accounting Research, Spring: 123–145.
23. Dye, R. A., 1998. Investor sophistication and voluntary disclosures. Review of Accounting Studies, 3 (3): 261–287.
24. Dye, R. A., 2001. An evaluation of ‘essays on disclosure’ and the disclosure literature in accounting. Journal of Accounting and Economics, 32: 181–235.
25. Easley, D., and O'Hara, M., 2004. Information and the cost of capital. Journal of Finance, 59: 1553–1584.
26. Fama, E. F., and French, K., 1992. The cross-section of expected stock returns. Journal of Finance, 47: 427–465.
27. Fama, E. F., and French, K., 1993. Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33: 3–56.
28. Fields, T. D., 2001. Empirical research on accounting choice. Journal of Accounting and Economics, 31: 255–307.
29. Fisher, L., 1959. Determinants of risk premiums on corporate bonds. The Journal of Political Economy, June: 217–237.
30. Fishman, M. J., and Hagerty, K. M., 2003. Mandatory versus voluntary disclosure in markets with informed and uninformed customers. Journal of Law Economics and Organization, 19: 45–63.
31. Francis, J., 2004. Costs of equity and earnings attributes. The Accounting Review, 79: 967–1010.
32. Frankel, R., 1995. Discretionary disclosure and external financing. The Accounting Review, 70: 135–150.
33. Fung, W., and Rudd, A., 1986. Pricing new corporate bond issues: an analysis of issue cost and seasoning effects. Journal of Finance, 41 July: 633–654.
34. Greene, W. H., 2000. Econometric Analysis, 4th edn, Upper Saddle River, NJ: Prentice Hall.
35. Griffiths, W., 1993. Learning and Practicing Econometrics, New York: Wiley.
36. Griliches, Z., 1977. Estimating the returns to schooling: some econometric problems. Econometrica, 45: 1–22.
37. Griliches, Z., and Hausman, J. A., 1986. Errors-in-variables in panel data. Journal of Econometrics, 31: 93–118.
38. Guo, R. J., 2004. Competitive costs of disclosure by biotech IPOs. Journal of Accounting Research, 42 (2): 319–364.
39. Hail, L., 2002. The impact of voluntary corporate disclosure on the ex-ante cost of capital for Swiss firms. European Accounting Review, 11 (4): 741–773.
40. Hail, L., and Leuz, C., 2004. “ Cost of capital and cash flow effects of U.S. cross-listings ”. University of Pennsylvania, University of Zurich. Working Paper
41. Hand, J., 1990. A test of the functional fixation hypothesis. The Accounting Review, 65 (4): 740–763.
42. Hansen, L. P., 1982. Large sample properties of generalized method of moment estimators. Econometrica, 50: 1029–1054.
43. Hausman, J. A., 1978. Specification tests in econometrics. Econometrica, 46 (6): 1251–1271.
44. Hausman, J. A., and Taylor, W., 1981. Panel data and unobservable individual effects. Econometrica, 49 (6): 1377–1398.
45. Hayashi, F., 2000. Econometrics, Princeton, NJ: Princeton University Press.
46. Healy, P., and Palepu, K., 2001. Information asymmetry, corporate disclosure and the capital markets: a review of the empirical disclosure literature. Journal of Accounting and Economics, 31: 405–440.
47. Healy, P., Fall 1999. “ Stock performance and intermediation changes surrounding sustained increases in disclosure ”. In Contemporary Accounting Research Fall, 485–520.
48. Heckman, J., 1979. Sample selection bias as a specification error. Econometrica, 47: 153–161.
49. Heckman, J., February 2000. “ Causal parameters and policy analysis in econometrics: a twentieth century perspective ”. In QJE February,
50. Heiflin, F., 2003. “ Disclosure quality and market liquidity ”. Purdue University. Working Paper
51. Himmelberg, C., 1999. Understanding the determinants of managerial ownership and the link between ownership and performance. Journal of Financial Economics, 53: 353–384.
52. Hirshleifer, D., and Teoh, S. H., 2003. Limited attention, information disclosure, and financial reporting. Journal of Accounting and Economics, 36: 337–386.
53. Hoch, I., 1962. Estimation of production function parameters combining time-series and cross-section data. Econometrica, 30: 34–53.
54. Hsiao, C., 2003. Analysis of Panel Data, Cambridge: University Press.
55. Ittner, C., and Larcker, D., 2001. Assessing empirical research in managerial accounting: a value-based management perspective. Journal of Accounting and Economics, 32: 349–410.
56. Jaffee, D., 1975. Cyclical variations in the risk structure of interest rates. Journal of Monetary Economics, 1 July: 309–325.
57. Jog, V., and McConomy, B. J., 2003. Voluntary disclosure of management earnings forecasts in IPO prospectuses. Journal of Business, Finance and Accounting, 30 (1/2): 125–167.
58. Jung, W. O., and Kwon, Y. K., 1988. Disclosure when the market is unsure of information endowment of managers. Journal of Accounting Research,: 146–153.
59. Kaplan, R. S., and Urwitz, G., 1979. Statistical models of bond ratings: a methodological inquiry. Journal of Business, April: 231–261.
60. Kasznik, R., and Lev, B., 1995. To warn or not to warn: management disclosures in the face of an earnings surprise. The Accounting Review, 70: 113–134.
61. Kennedy, P., 2003. A Guide to Econometrics, 5th edn, Cambridge, MA: MIT Press.
62. Kidwell, S., 1984. Sec rule 415: the ultimate competitive bid. Journal of Financial and Quantitative Analysis, 19 June: 183–195.
63. Kim, J. B., 1997. Institutional holdings and trading volume reactions to quarterly earnings announcements. Journal of Accounting Auditing and Finance, 12 (1): 1–15.
64. Lanen, W. N., and Verrecchia, R. E., 1987. Operating decisions and the disclosure of management accounting information. Journal of Accounting Research, 25: 165–189. Suppl.
65. Lang, M., and Lundholm, R., 1993. Cross-sectional determinants of analysts rating of corporate disclosures. Journal of Accounting Research, 31: 246–271.
66. Lang, M., and Lundholm, R., 1996. Corporate disclosure policy and analyst behavior. The Accounting Review, 71 (4): 467–492.
67. Lang, M., and Lundholm, R., 2000. Voluntary disclosure and equity offerings: reducing information asymmetry or hyping the stock?. Contemporary Accounting Research, 17 (4): 623–662.
68. Larcker, D., and Rusticus, T., 2005. “ On the use of instrumental variables in accounting research ”. University of Pennsylvania. Working Paper
69. Leuz, C., and Verrecchia, R., 2000. The economic consequences of increased disclosure. Journal of Accounting Research, 38: 91–124.
70. Leuz, C., and Verrecchia, R., 2005. “ Firms' capital allocation choices, information quality, and the cost of capital ”. University of Pennsylvania. Working Paper
71. Levitt, A., 1998. “ ‘The numbers game’ remarks of Chairman Arthur Levit at the NYU Center for Law and Business ”. New York, NY Available at: www.sec.gov
72. Lundholm, R., and Myers, L., 2002. Bringing the future forward: the effect of disclosure on the returns–earnings relation. Journal of Accounting Research, 40 (3): 809–839.
73. Maddala, G., 2001. Introduction to Econometrics, 3rd edn, New York: Wiley.
74. Mak, Y. T., 1996. Forecast disclosure by Initial Public Offering firms in a low-litigation environment. Journal of Accounting and Public Policy, 15 (2): 111–136.
75. Mansi, S., 2004. Does auditor quality and tenure matter to investors? Evidence from the bond market. Journal of Accounting Research, 42 (4): 755–793.
76. Marshall, A., 1961. Principles of Economics, 9th Variorum edn, London: Macmillan.
77. Merton, R., 1987. A simple model of capital market equilibrium with incomplete information. Journal of Finance, 42: 483–510.
78. Miller, G., 2002. Earnings performance and discretionary disclosure. Journal of Accounting Research, 40 (1): 173–204.
79. Mundlak, Y., 1961. Empirical production function free of management bias. Journal of Farm Economics, 43: 44–56.
80. Mundlak, Y., 1978. On pooling of time series and cross section data. Econometrica, 46 (1): 69–85.
81. Myers, S. C., and Majluf, N. S., 1984. Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13: 187–221.
82. Nagar, V., 1999. The role of the manager's human capital in discretionary disclosure. Journal of Accounting Research, 37: 167–181. Suppl.
83. Richardson, A., and Welker, M., 2001. Social disclosure, financial disclosure and the cost of equity capital. Accounting, Organization and Society, 26: 597–616.
84. Sargan, J. D., 1958. The estimation of economic relationships using instrumental variables. Econometrica, 26: 393–415.
85. Sengupta, P., 1998. Corporate disclosure quality and the cost of debt. The Accounting Review, 73 (4): 459–474.
86. Shehata, M., 1991. Self-selection bias and the economic consequences of accounting regulation: an application of two-stage switching regression to SFAS No. 2. The Accounting Review, 66 (4): 768–787.
87. Skinner, D. J., 1994. Why firms voluntarily disclose bad news. Journal of Accounting Research, 32: 38–60.
88. Skinner, D. J., 1997. Earnings disclosures and stockholder lawsuits. Journal of Accounting and Economics, 23 (3): 249–282.
89. Trueman, B., 1986. Why do managers voluntarily release earnings forecasts?. Journal of Accounting and Economics, 8: 53–72.
90. Verrecchia, R. E., 1983. Discretionary disclosure. Journal of Accounting and Economics, 5: 179–195.
91. Verrecchia, R. E., 2001. Essays on disclosure. Journal of Accounting and Economics, 32: 97–180.
92. Wagenhofer, A., 1990. Voluntary disclosure with a strategic opponent. Journal of Accounting and Economics, 12 (4): 341–363.
93. Walther, B., 1997. Investor sophistication and market earnings expectations. Journal of Accounting Research, 35 (2): 157–180.
94. Welker, M., 1995. Disclosure policy, information asymmetry and liquidity in equity markets. Contemporary Accounting Research, 11: 801–828.
95. White, H., 1980. A heteroscedasticity-consistent covariance matrix estimator and a direct test for heteroscedasticity. Econometrica, 48: 817–838.
96. Wooldridge, J. M., 2002. Econometric Analysis of Cross Section and Panel Data, Edited by: Wooldridge, J. M., Cambridge, MA: MIT Press.
97. Zhang, G., 2001. Private information production, public disclosure, and the cost of capital: theory and implications. Contemporary Accounting Research, 18 (2): 363–384.
98. Zhou, X., 2001. Understanding the determinants of managerial ownership and the link between ownership and performance: comment. Journal of Financial Economics, 62: 559–571.
99. Ziebart, D., and Reiter, S., 1992. Bond ratings, bond yields and financial information. Contemporary Accounting Research, 9 (1): 252–282.