@article{c1d226f328f946b1bff101e24831a2e7,
title = "Annual report narratives and the cost of equity capital: UK evidence of a u-shaped relation",
abstract = "We hypothesise and test for a U-shaped relation between the cost of equity capital and the level of disclosure in annual report narratives. Using a computer-generated word-count-based index of the level of disclosure in U.K. annual report narratives, we document a negative relation with the cost of equity capital at low levels of disclosure, and a positive relation at higher levels of disclosure, together implying the presence of an optimal level of disclosure. We interpret the positive relation at higher levels of disclosure as evidence of uninformative clutter increasing the cost of equity capital. Additional analyses indicate the presence of both firm-level learning and regulatory corporate reporting initiatives as factors shaping adjustments towards optimum levels of disclosure.",
keywords = "Clutter, Disclosure Optimum, Learning Effects, Narratives",
author = "Vasiliki Athanasakou and Florian Eugster and Thomas Schleicher and Martin Walker",
note = "Funding Information: Florian Eugster gratefully acknowledges the support of Handelsbanken Wallander stipendium. The authors thank Mahmoud El-Haj, Paul Rayson, and Steven Young, for their work on developing the CFIE annual report narratives database; and Mattias Hamberg (discussant) and the participants of the Accounting Research Seminar at Stockholm School of Economics, the University of Bradford, the 2016 Nordic Accounting Conference, and the 2017 EAA Congress in Valencia, for helpful comments on earlier versions of the paper. We thank the anonymous reviewer and the special issue editors, Reuven Lehavy and Florin Vasvari, for very helpful comments. All remaining errors are the responsibility of the authors. Publisher Copyright: {\textcopyright} 2020, {\textcopyright} 2020 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. Copyright: Copyright 2020 Elsevier B.V., All rights reserved.",
year = "2020",
month = jan,
day = "26",
doi = "10.1080/09638180.2019.1707102",
language = "English",
volume = "29",
pages = "27--54",
journal = "European Accounting Review",
issn = "0963-8180",
publisher = "Routledge",
number = "1",
}