Financial disclosure attributes and the cost of equity capital : a study on the UK FTSE-350 firms

Detalhes bibliográficos
Autor(a) principal: Marques, Maria Luís Correia
Data de Publicação: 2023
Tipo de documento: Dissertação
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10400.14/42571
Resumo: This dissertation investigates the relationship between the qualitative disclosure of financial reports (commonly referred to as financial narratives) and the cost of equity capital of firms, with the aim of identifying attributes that may contribute to improving evaluation models. Based on the literature review, the dissertation is divided into three parts, each related to an attribute of qualitative disclosure that may explain this relationship. These attributes include the complexity of language, the tone, and the level of forward-looking disclosure. It also includes a fourth part, where firms are categorized based on their performance, measured through the return on assets. This division allowed for an investigation into potential differences in the impact of these three disclosure attributes between firms with high versus low performance levels. Empirical studies are presented to support these expectations, using a sample of annual report disclosures of UK FTSE-350 firms, from 2015 to 2018. The dissertation finds that the complexity of language is statistically insignificant in explaining the cost of capital. The results for the tone and forward-looking disclosures were ambiguous. Nonetheless, it appears that they have an impact on the cost of capital. The dissertation concludes that there is a relationship between qualitative disclosure and the cost of equity capital. The findings highlight the importance of qualitative disclosure and suggest that firms should carefully consider the complexity of language, tone, and level of forward-looking disclosure in their financial reporting process to minimize the cost of equity capital. This dissertation adds to the existing body of literature by presenting empirical findings on how qualitative disclosures can affect a company's cost of equity capital. Moreover, it identifies crucial attributes of such disclosures that, if effectively utilized, can aid firms in improving their communication with investors and in better managing their capital costs.
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spelling Financial disclosure attributes and the cost of equity capital : a study on the UK FTSE-350 firmsQualitative disclosureComplexity of languageToneForward-looking informationCost of equity capitalDivulgação qualitativaComplexidade de linguagemTomInformação prospetivaCusto do capital próprioDomínio/Área Científica::Ciências Sociais::Economia e GestãoThis dissertation investigates the relationship between the qualitative disclosure of financial reports (commonly referred to as financial narratives) and the cost of equity capital of firms, with the aim of identifying attributes that may contribute to improving evaluation models. Based on the literature review, the dissertation is divided into three parts, each related to an attribute of qualitative disclosure that may explain this relationship. These attributes include the complexity of language, the tone, and the level of forward-looking disclosure. It also includes a fourth part, where firms are categorized based on their performance, measured through the return on assets. This division allowed for an investigation into potential differences in the impact of these three disclosure attributes between firms with high versus low performance levels. Empirical studies are presented to support these expectations, using a sample of annual report disclosures of UK FTSE-350 firms, from 2015 to 2018. The dissertation finds that the complexity of language is statistically insignificant in explaining the cost of capital. The results for the tone and forward-looking disclosures were ambiguous. Nonetheless, it appears that they have an impact on the cost of capital. The dissertation concludes that there is a relationship between qualitative disclosure and the cost of equity capital. The findings highlight the importance of qualitative disclosure and suggest that firms should carefully consider the complexity of language, tone, and level of forward-looking disclosure in their financial reporting process to minimize the cost of equity capital. This dissertation adds to the existing body of literature by presenting empirical findings on how qualitative disclosures can affect a company's cost of equity capital. Moreover, it identifies crucial attributes of such disclosures that, if effectively utilized, can aid firms in improving their communication with investors and in better managing their capital costs.Esta dissertação investiga a relação entre as divulgações qualitativas de informação financeira (vulgarmente designadas de narrativas financeiras) e o custo do capital próprio das empresas, com o objetivo de identificar atributos que possam contribuir para melhorar os modelos de avaliação. Com base na revisão da literatura, a dissertação é dividida em três partes, cada uma relacionada a um atributo da divulgação qualitativa de informação que pode explicar a sua relação com o custo de capital próprio. Esses atributos incluem a complexidade da linguagem utilizada, o tom e o nível de informação prospetiva. Inclui, ainda, uma quarta parte, na qual as empresas são categorizadas com base no seu desempenho, medido pelo retorno sobre os ativos. Essa divisão permitiu investigar possíveis diferenças no impacto desses três atributos entre empresas com níveis de desempenho alto versus baixo. Diversos estudos empíricos são apresentados para apoiar essas expectativas, usando uma amostra de partes de relatórios anuais de empresas do FTSE-350 do Reino Unido, de 2015 a 2018. O estudo constata que a complexidade da linguagem não tem um impacto significativo no custo de capital. Os resultados para o tom e divulgações prospetivas foram ambíguos. No entanto, os resultados mostram que estes têm um impacto no custo de capital. A dissertação conclui que há uma relação entre a divulgação voluntária e o custo do capital próprio. Os resultados destacam a importância da divulgação qualitativa e sugerem que as empresas devem considerar cuidadosamente a complexidade da linguagem, o tom e o nível de divulgação de informações prospetivas na construção dos seus relatórios financeiros, de forma a minimizar o custo do capital próprio Esta dissertação contribui para a área, fornecendo evidências empíricas do impacto das divulgações qualitativas sobre o custo do capital próprio e identificando atributos chave dessas divulgações que, se bem utilizados, podem ajudar as empresas a comunicarem melhor com investidores e gerir os seus custos de capital.Alves, Paulo Alexandre PimentaVeritati - Repositório Institucional da Universidade Católica PortuguesaMarques, Maria Luís Correia2023-09-22T12:10:31Z2023-07-132023-042023-07-13T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfhttp://hdl.handle.net/10400.14/42571TID:203350642enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-09-26T01:44:32Zoai:repositorio.ucp.pt:10400.14/42571Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T20:31:00.611784Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Financial disclosure attributes and the cost of equity capital : a study on the UK FTSE-350 firms
title Financial disclosure attributes and the cost of equity capital : a study on the UK FTSE-350 firms
spellingShingle Financial disclosure attributes and the cost of equity capital : a study on the UK FTSE-350 firms
Marques, Maria Luís Correia
Qualitative disclosure
Complexity of language
Tone
Forward-looking information
Cost of equity capital
Divulgação qualitativa
Complexidade de linguagem
Tom
Informação prospetiva
Custo do capital próprio
Domínio/Área Científica::Ciências Sociais::Economia e Gestão
title_short Financial disclosure attributes and the cost of equity capital : a study on the UK FTSE-350 firms
title_full Financial disclosure attributes and the cost of equity capital : a study on the UK FTSE-350 firms
title_fullStr Financial disclosure attributes and the cost of equity capital : a study on the UK FTSE-350 firms
title_full_unstemmed Financial disclosure attributes and the cost of equity capital : a study on the UK FTSE-350 firms
title_sort Financial disclosure attributes and the cost of equity capital : a study on the UK FTSE-350 firms
author Marques, Maria Luís Correia
author_facet Marques, Maria Luís Correia
author_role author
dc.contributor.none.fl_str_mv Alves, Paulo Alexandre Pimenta
Veritati - Repositório Institucional da Universidade Católica Portuguesa
dc.contributor.author.fl_str_mv Marques, Maria Luís Correia
dc.subject.por.fl_str_mv Qualitative disclosure
Complexity of language
Tone
Forward-looking information
Cost of equity capital
Divulgação qualitativa
Complexidade de linguagem
Tom
Informação prospetiva
Custo do capital próprio
Domínio/Área Científica::Ciências Sociais::Economia e Gestão
topic Qualitative disclosure
Complexity of language
Tone
Forward-looking information
Cost of equity capital
Divulgação qualitativa
Complexidade de linguagem
Tom
Informação prospetiva
Custo do capital próprio
Domínio/Área Científica::Ciências Sociais::Economia e Gestão
description This dissertation investigates the relationship between the qualitative disclosure of financial reports (commonly referred to as financial narratives) and the cost of equity capital of firms, with the aim of identifying attributes that may contribute to improving evaluation models. Based on the literature review, the dissertation is divided into three parts, each related to an attribute of qualitative disclosure that may explain this relationship. These attributes include the complexity of language, the tone, and the level of forward-looking disclosure. It also includes a fourth part, where firms are categorized based on their performance, measured through the return on assets. This division allowed for an investigation into potential differences in the impact of these three disclosure attributes between firms with high versus low performance levels. Empirical studies are presented to support these expectations, using a sample of annual report disclosures of UK FTSE-350 firms, from 2015 to 2018. The dissertation finds that the complexity of language is statistically insignificant in explaining the cost of capital. The results for the tone and forward-looking disclosures were ambiguous. Nonetheless, it appears that they have an impact on the cost of capital. The dissertation concludes that there is a relationship between qualitative disclosure and the cost of equity capital. The findings highlight the importance of qualitative disclosure and suggest that firms should carefully consider the complexity of language, tone, and level of forward-looking disclosure in their financial reporting process to minimize the cost of equity capital. This dissertation adds to the existing body of literature by presenting empirical findings on how qualitative disclosures can affect a company's cost of equity capital. Moreover, it identifies crucial attributes of such disclosures that, if effectively utilized, can aid firms in improving their communication with investors and in better managing their capital costs.
publishDate 2023
dc.date.none.fl_str_mv 2023-09-22T12:10:31Z
2023-07-13
2023-04
2023-07-13T00:00:00Z
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