Integrated information and the cost of capital

• Published in: International business review 2017-10, Vol.26 (5), p.959-975
• Main Authors: García-Sánchez, Isabel-María, Noguera-Gámez, Ligia
• Format: Article
• Language: English
• Subjects: Asymmetric information; Cost of capital; Disclosure; Integrated report
• ISSN: 0969-5931; 1873-6149
• DOI: 10.1016/j.ibusrev.2017.03.004

•Previous research has revealed that disclosing financial information gives important economic advantages to companies.•This work aims to extend the existing empirical evidence, analysing the effect that the disclosure of integrated information has on the cost of capital.•The results confirmed that a negative relationship exists between the cost of capital and the disclosure of an integrated report.•The reduction of the cost of capital as a result of the disclosure of an integrated report is especially relevant to those companies that need to increase their basic funding.•They have considerable problems with asymmetric information or they operate in markets with limited protection for investors. The growing requirements for corporate transparency have encouraged companies to report their performance to shareholders, investors and society in general from the economic, social and environmental points of view. However, many reports involve difficulties at the moment of analysing the information. To help minimize this problem, the integrated report has arisen. This document integrates all the financial, social and environmental information, jointly disclosing the key performance statistics. Previous research has revealed that disclosing financial information gives important economic advantages to companies. This work aims to extend the existing empirical evidence, analysing the effect that the disclosure of integrated information has on the cost of capital. Accordingly, we used a sample of 995 companies in 27 countries and 3294 observations. The period in which the sample was taken was from 2009 to 2013. The results, after applying the panel data methodology, confirmed that a negative relationship exists between the cost of capital and the disclosure of an integrated report. The reduction of the cost of capital as a result of the disclosure of an integrated report is especially relevant to those companies that need to increase their basic funding. They have considerable problems with asymmetric information or they operate in markets with limited protection for investors.