Analyzing the Relationship between Financial Reporting and Cost of Equity for Romanian Companies Listed on the Bucharest Stock Exchange

Author:Univ. Lecturer Diana MANEA, Ph. D.

JEL:M41

DOI:

Keywords:financial reporting, cost of capital, disclosure index

Abstract:
In recent years, the disclosure of financial and non-financial information by listed companies has become a subject of growing interest for Romanian researchers. For a long time, financial disclosure has been seen by Romanian companies only as a legal obligation and nothing more. Romanian companies have proved reluctant to increase transparency and disclosure and voluntary disclosure has been hard to conceive. But more and more studies argue that increased disclosure has benefits well beyond its costs and such a benefit is the reduction of cost of capital. The following study aims to determine if the voluntary disclosure of financial and non-financial information can be used by Romanian companies listed on Bucharest Stock Exchange (BSE) in order to reduce their cost of capital. In this purpose, the level of disclosure was measured using a self-constructed index and the cost of capital was estimated using the analysts forecasts provided by I/B/E/S. The results indicate the existence of a significant negative correlation between the two variables.\r\n\r\n

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