Information and the cost of capital: The Easley-O'Hara (2004) model with endogenous information acquisition

Greg Clinch, Brett Lombardi

Research output: Contribution to journalArticleResearchpeer-review

6 Citations (Scopus)

Abstract

We investigate the impact of endogenous information acquisition on Easley and O'Hara's (2004) result that moving information from being publicly to privately available results in an increase in a firm's cost of capital. As in Christensenet al.(2010), when the cost of information acquisition is fixed, Easley and O'Hara's result reverses. We study two scenarios, however, where Easley and O'Hara's result can continue to hold (i): where the cost of information acquisition is increasing in its precision, and (ii) where the benefits of acquiring private information span multiple firms.

Original languageEnglish
Pages (from-to)5-14
Number of pages10
JournalAustralian Journal of Management
Volume36
Issue number1
DOIs
Publication statusPublished - 1 Apr 2011
Externally publishedYes

Keywords

  • cost of capital
  • endogenous information acquisition

Cite this