The goal of this project is to explore the impact of financial accounting information
on the cost of capital. While prior analytical research focuses on the valuation role of
financial accounting when investigating this link, we will develop and test a model
which captures both the valuation role and the contracting role of accounting. The
validity of this model will then be tested empirically using international accounting
and capital market data. We expect the results from this project to explain some of the
existing conflicting evidence about the interplay of public information in capital
markets and the cost of capital.