| dc.description.abstract | Abstract
This study mainly explores the impact of corporate risk factor disclosures on the cost of equity capital. Although the company can reduce the information asymmetry with investors by increasing disclosure, but since risk disclosures are often regarded as negative, increased disclosure will also lead to an increase in investors′ risk perception. This study uses listed companies in Taiwan’s semiconductor industry from 2006 to 2020, and uses the ex-ante cost of equity capital as a dependent variable.
The empirical results show that the degree of risk factor disclosures is positively correlated with the ex-ante cost of equity capital, which means that the more risk factors disclosed by the management, the higher the risk perception of investors, and the required return will increase; in addition, each risk factor is discussed, and it is found that the disclosure of risks related to “domestic and foreign policy and legal changes”, “corporate image changes”, “mergers and acquisitions”, “mass transfer or replacement of directors or supervisors or holding more than 10% of the shares”, ”litigation or non-litigation”, “information security”, “climate change” will increase the cost of equity capital, and the disclosure of “future R&D plans and investment costs” will reduce the cost of equity capital, it is speculated that the company can improve the information asymmetry through this disclosure, so that investors will reduce their required return.
Key words: Risk factor disclosures, Cost of equity capital, Information asymmetry, Risk perception | en_US |