1 Department of Economics and Business - Business Studies, Department of Economics and Business Economics, Aarhus BSS, Aarhus University2 Department of Business Studies, Aarhus School of Business, Aarhus BSS, Aarhus University3 Accounting Research Centre - ARC, Aarhus School of Business, Aarhus BSS, Aarhus University4 Department of Economics and Business Economics, Aarhus BSS, Aarhus University5 Department of Economics and Business Economics, Aarhus BSS, Aarhus University
Our aim is to examine the reduction of the cost-of-capital in non-listed companies (SME’s) through exercising a high level of corporate accounting transparency. We see a tendency towards greater stakeholder inclusivity, reflecting a shift away from the dominance of agency theory frameworks and towards a more stakeholder-oriented framework, i.e. that companies have responsibilities to all the different stakeholders. Management control over critical information complicates the stakeholder/agency problem, and makes it difficult for stakeholders to identify if management is acting in their interests. Transparency could be a means to make the stakeholders confident by reducing the information asymmetry risk between management and stakeholders, and hereby reduce the stakeholder perceived risk leading to reduced cost-of-capital towards suppliers, banks, etc. The material used is a randomly selected sample of 385 Danish annual financial reports (official paper-version). The proxies for transparency involve management commentary , accounting notes, number of text units in management commentary, use of numbers in management commentary and description of accounting practice. Our findings support corporate transparency as a positive mechanism since the cost-of-capital items seems (highly) related to corporate transparency. This contributes to a better understanding of the circumstantial relationship between good corporate transparency and lower cost-of-capital among non-listed companies.
Corporate Governance; Corporate Transparency; Small and Medium-sized Enterprises; non-listed companies
Main Research Area:
34th Annual Congress of the European Accounting Association, 2011