Customer value disclosure and cost of equity capital

R. Orens, W.A.A. Aerts, N. Lybaert

    Research output: Contribution to journalArticleScientificpeer-review

    Abstract

    Purpose
    – This paper seeks to examine the association between a firm's extent and precision of customer value disclosure and its implied cost of equity capital. In addition, it aims to investigate whether industry competition intensity attenuates this association.

    Design/methodology/approach
    – The content of corporate websites from four continental European countries is analysed on the presence and precision of customer value information and empirically test whether content and precision are associated with the firm's implied cost of equity capital measurement.

    Findings
    – The results show a negative association between cross‐sectional differences in the extent of customer value disclosure and cross‐sectional differences in a firm's cost of equity capital. In addition, the precision of the customer value information disclosed affects this association. It is observed that a negative relationship between quantitative (or hard) customer value disclosure and a firm's cost of equity capital, but not for qualitative (or soft) customer value disclosure. As expected, industry competition intensity attenuates the association between quantitative customer value disclosures and a firm's cost of equity capital.

    Research limitations/implications
    – The paper considers web placement of customer value disclosure although a firm might disclose such information through other information channels as well.

    Practical implications
    – A firm tends to benefit economically from more precise customer value disclosure.

    Originality/value
    – The paper extends existing evidence by considering the capital market implications of disclosing customer value information. In addition, it examines whether industry competition affects the association between customer value disclosure and the firm's cost of equity capital.
    Original languageEnglish
    Pages (from-to)130-147
    JournalReview of Accounting and Finance
    Volume12
    Issue number2
    Publication statusPublished - 2013

    Fingerprint

    Cost of equity capital
    Disclosure
    Customer value
    Industry competition
    Capital markets
    World Wide Web
    Placement
    Design methodology
    European countries
    Corporate websites

    Cite this

    Orens, R. ; Aerts, W.A.A. ; Lybaert, N. / Customer value disclosure and cost of equity capital. In: Review of Accounting and Finance. 2013 ; Vol. 12, No. 2. pp. 130-147.
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    Customer value disclosure and cost of equity capital. / Orens, R.; Aerts, W.A.A.; Lybaert, N.

    In: Review of Accounting and Finance, Vol. 12, No. 2, 2013, p. 130-147.

    Research output: Contribution to journalArticleScientificpeer-review

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    AB - Purpose– This paper seeks to examine the association between a firm's extent and precision of customer value disclosure and its implied cost of equity capital. In addition, it aims to investigate whether industry competition intensity attenuates this association.Design/methodology/approach– The content of corporate websites from four continental European countries is analysed on the presence and precision of customer value information and empirically test whether content and precision are associated with the firm's implied cost of equity capital measurement.Findings– The results show a negative association between cross‐sectional differences in the extent of customer value disclosure and cross‐sectional differences in a firm's cost of equity capital. In addition, the precision of the customer value information disclosed affects this association. It is observed that a negative relationship between quantitative (or hard) customer value disclosure and a firm's cost of equity capital, but not for qualitative (or soft) customer value disclosure. As expected, industry competition intensity attenuates the association between quantitative customer value disclosures and a firm's cost of equity capital.Research limitations/implications– The paper considers web placement of customer value disclosure although a firm might disclose such information through other information channels as well.Practical implications– A firm tends to benefit economically from more precise customer value disclosure.Originality/value– The paper extends existing evidence by considering the capital market implications of disclosing customer value information. In addition, it examines whether industry competition affects the association between customer value disclosure and the firm's cost of equity capital.

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