Segment disclosure and cost of capital Articles uri icon

publication date

  • May 2015

start page

  • 367

end page

  • 411


  • 3-4


  • 42

International Standard Serial Number (ISSN)

  • 0306-686X

Electronic International Standard Serial Number (EISSN)

  • 1468-5957


  • We investigate whether segment disclosure influences cost of capital. Improved segment reporting is expected to decrease cost of capital by reducing estimation risk. However, in a competitive environment segment disclosure may also generate uncertainties about future prospects and lead to a larger cost of capital. Asset-pricing tests confirm that segment disclosure is a priced risk factor. Also, segment disclosure reduces ex-ante estimates of cost of equity capital and other measures connected to risk. These results suggest a negative relation between segment disclosure and cost of capital. Our results also show that competition reduces, but does not eliminate, the previous relationship.


  • Business
  • Economics


  • segment disclosure; earnings quality; forecast error; cost of capital