Journal
ACCOUNTING ORGANIZATIONS AND SOCIETY
Volume 26, Issue 7-8, Pages 597-616Publisher
PERGAMON-ELSEVIER SCIENCE LTD
DOI: 10.1016/S0361-3682(01)00025-3
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We test the relation between financial and social disclosure and the cost of equity capital for a sample of Canadian firms with year-ends in 1990, 1991 and 1992. We find that, consistent with prior research, the quantity and quality of financial disclosure is negatively related to the cost of equity capital for firms with low analyst following. Contrary to expectations, there is a significant positive relation between social disclosures and the cost of equity capital. This positive relationship is mitigated among firms with better financial performance. We consider some biases in social disclosures that may explain this result. We also note that social disclosures may benefit the firm through its effect on organizational stakeholders other than equity investors. (C) 2001 Published by Elsevier Science Ltd.
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