Jennifer Martínez Ferrero

How are corporate disclosures related to the cost of capital? The fundamental role of information asymmetry

Purpose – The purpose of this paper is to analyze empirically the fundamental role that information asymmetry plays in the functioning of an efficient capital market as mediator in the relation between corporate disclosures and cost of capital. Design/methodology/approach – By using a sample of 1,260 international non-financial listed companies in the period 2007-2014. Findings – The findings suggest that high-quality financial and social disclosures quality reduce the cost of capital, by decreasing information asymmetry. In other words, the authors find evidence of the mediator role of information asymmetry in the relation between corporate disclosures and the cost of capital. These results are also controlled for differences on accounting standards and other institutional factors. Originality/value – The central assumption is that the demand for corporate disclosures that reduces the information advantages of some investors (who are more informed) arises from agency conflicts and these information diffe...

The link between earnings management and corporate performance: evidence from family firms

The aim of this research is to analyse the financial consequences of earnings management (EM) practices for corporate performance, focusing on family firms. These businesses are led and controlled by family members whose main interest is the firms long-run survival through succession. Using a sample composed of 1,275 international listed companies for the period 2002-2010, our empirical evidence shows that in the short-term, those companies that implement EM practices enjoy higher market valuation because the market, investors and other stakeholders do not detect and cannot penalise such practices. Family firms have a long-term focus and more incentives for controlling and monitoring managerial decisions, avoiding information symmetries and therefore EM practices. Thus, the positive effect of EM on market value is lower in highly concentrated ownership structures as result of the negative link between family control, EM and performance.