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    Disaggregation, auditor conservatism and implied cost of equity capital: An international evidence from the GCC

    Access Status
    Fulltext not available
    Authors
    Al-Hadi, Ahmed Khamis Hamdan
    Taylor, Grantley
    Hossain, M.
    Date
    2015
    Type
    Journal Article
    
    Metadata
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    Citation
    Al-Hadi, A.K.H. and Taylor, G. and Hossain, M. 2015. Disaggregation, auditor conservatism and implied cost of equity capital: An international evidence from the GCC. Journal of Multinational Financial Management. 29: pp. 66-98.
    Source Title
    Journal of Multinational Financial Management
    DOI
    10.1016/j.mulfin.2014.11.005
    ISSN
    1042-444X
    School
    School of Accounting
    URI
    http://hdl.handle.net/20.500.11937/13412
    Collection
    • Curtin Research Publications
    Abstract

    This research investigates the association between discretionary disaggregation in mandatory risk disclosures, auditor conservatism and the implied cost of equity capital. Based on a sample of financial firms from the six Gulf Cooperation Council (GCC) countries in the period 2007-2011, we find that the implied cost of equity capital is significantly negatively associated with discretionary disaggregation in mandatory market risk disclosures after controlling for firm-specific characteristics and country-specific institutional factors. Furthermore, the interaction between auditor conservatism and disaggregation in firms' mandatory risk disclosures is negatively associated with the implied cost of equity capital, suggesting that the firm disclosing more disaggregation in mandatory risk disclosure enjoys greater reduction in the implied cost of equity capital when audited by a conservative auditor. These findings are robust when subjected to a series of sensitivity tests. Collectively, these results demonstrate that more discretionary disaggregation in risk disclosures provides more private information to investors.

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