Northampton Electronic Collection of Theses and Research

Does hedge disclosure influence cost of capital for European banks?

Elshandidy, T. and Acheampong, A. (2021) Does hedge disclosure influence cost of capital for European banks? International Review of Financial Analysis. 78 1057-5219.

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Elshandidy_Acheampong_IRFA_2021_Does_hedge_disclosure_influence_cost_of_capital_for_European_banks.pdf - Accepted Version
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Abstract:
Upon extracting and quantifying relevant hedge information from the narrative section of European banks annual reports, this paper examines the impact of such information on cost of capital [as measured by weighted average cost of capital (WACC), cost of equity (COE) and cost of debt (COD)]. Using a sample of 1885 bank-year observations from 19 countries, we find that textual hedge disclosure leads to a significant reduction in WACC, COE, and COD; thus explains a substantial portion of variation in cost of capital. Further, we find that these results are stronger in countries with high corruption and financial openness. Our results are robust to several controls and model specification. Collectively, our findings enrich prior evidence which examines the economic consequences of hedge disclosure.
Uncontrolled Keywords:
Hedging, Cost of capital, cost of equity, cost of debt, Textual Analysis, Annual Reports
Creators:
Elshandidy, T. and Acheampong, A.
Faculties, Divisions and Institutes:
Faculties > Faculty of Business & Law > Accounting & Finance
Date:
1 November 2021
Date Type:
Publication
Journal or Publication Title:
International Review of Financial Analysis
Volume:
78
Language:
English
DOI:
10.1016/j.irfa.2021.101942
ISSN:
1057-5219
Status:
Published / Disseminated
Refereed:
Yes
Related URLs:
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