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G. Feltham, S. Robb and P. Zhang, “Precision in Accounting Information, Financial Leverage and the Value of Equity,” Journal of Business Finance and Accounting, Vol. 34, No. 7-8, 2007, pp. 1099-1122. doi:10.1111/j.1468-5957.2007.02027.x

has been cited by the following article:

• TITLE: Accounting Information and Cost of Capital: A Theoretical Approach

  AUTHORS: Nicholas Apergis, George Artikis, Sofia Eleftheriou, John Sorros

  KEYWORDS: Theoretical Model, Accounting Information, Cost of Capital, Stock Returns

  JOURNAL NAME: Modern Economy, Vol.2 No.4, September 21, 2011

  ABSTRACT: The primary goal of this study is to provide a theoretical model that shows explicit solutions for equilibrium prices and derives the equilibrium required return for the firm’s stock price. In other words, this theoretical study provides a direct link between accounting information, related to the firm’s reports, and the cost of capital within an equilibrium setting. Accounting information is judged to be of high value because it affects the market’s ability to direct firms’ capital allocation choices. The findings showed that an increase in expected cash flows, coming from improvements in the quality of accounting information, leads to a reduction in the firm’s cost of capital.