The Cost of Capital in Europe: An Empirical Analysis and the Preliminary Impact of International Accounting Harmonisation

Sponsored By ACCA

Topics:

Accounting > Accounting Standards

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Abstract:

The cost of capital is the return that investors require for bearing the risk they perceive of the company's operating cash flows. From a policy point of view, the cost of capital provides a potentially useful metric for evaluating the economic consequences of managerial and regulatory choices on key issues that affect the market's perception of companies, such as corporate disclosure and governance. Companies that improve the quality and reduce the asymmetry of information should attract more investors, leading the market to discount the company's future earnings at a lower rate, which in turn leads to an increase in its current value and the wealth of its existing shareholders.

DETAILS

Sponsored by: ACCA

Posted: June 06, 2008

Length: 70 pages

Format: PDF (713 kb)

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