Risk-factor disclosure and asset prices Mirko S. Heinle, Kevin C. Smith & Robert E. Verrecchia
Tipo de material: ArtículoDescripción: Páginas 191 a la 208Tema(s): En: The accounting review 2018 V.93 No.2 (Mar)Incluye figuras y referencias bibliográficasResumen: While researchers and practitioners alike estimate firms' exposures to systematic risk factors, the disclosure literature typically assumes that exposures are common knowledge. We develop a model where the firm's exposure to a factor is unknown, and analyze the effects of factor-exposure uncertainty on share price and the effects of disclosure about the exposure. We find that: (1) factor-exposure uncertainty introduces skewness and excess kurtosis in the cash flow distribution relative to the commonly used normal distribution; (2) risk-factor disclosure affects all moments of that distribution; and (3) the pricing of higher moments affects the price response of disclosure and the incentives to disclose. For example, factor-exposure uncertainty may actually increase price when the uncertainty implies positive skewness in the cash flow distribution. Hence, a reduction in uncertainty through disclosure may increase cost of capital. We also extend our model to multiple firms and show that factor-exposure uncertainty manifests as uncertainty about a firm's CAPM beta.Tipo de ítem | Biblioteca actual | Colección | Signatura topográfica | Info Vol | Copia número | Estado | Fecha de vencimiento | Código de barras | |
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Revistas | Central Bogotá Sala Hemeroteca | Colección Hemeroteca | 657 (Navegar estantería(Abre debajo)) | 2018 V.93 No.2 (Mar) | 1 | Disponible | 0000002033447 |
While researchers and practitioners alike estimate firms' exposures to systematic risk factors, the disclosure literature typically assumes that exposures are common knowledge. We develop a model where the firm's exposure to a factor is unknown, and analyze the effects of factor-exposure uncertainty on share price and the effects of disclosure about the exposure. We find that: (1) factor-exposure uncertainty introduces skewness and excess kurtosis in the cash flow distribution relative to the commonly used normal distribution; (2) risk-factor disclosure affects all moments of that distribution; and (3) the pricing of higher moments affects the price response of disclosure and the incentives to disclose. For example, factor-exposure uncertainty may actually increase price when the uncertainty implies positive skewness in the cash flow distribution. Hence, a reduction in uncertainty through disclosure may increase cost of capital. We also extend our model to multiple firms and show that factor-exposure uncertainty manifests as uncertainty about a firm's CAPM beta.