The Hidden Value of Employee Pay Disclosures Evidenced through Cost of Capital

Voluntary disclosure theory suggests a firm increasing its disclosures should lower the information asymmetry component of its cost of capital. Empirical results on specific disclosures are mixed though, as individual disclosures may not provide enough value to investors in disclosure rich environments. Salary expense disclosures, unlike some other cost disclosures, may provide insight into increasing firm risk leading to an increased cost of capital, as employee pay has been shown to increase in response to leverage increases. I examine whether salary expense disclosures provide valuable information to investors, as measured through a disclosing firm's cost of capital, and I examine the channels through which the disclosure provides the information. I find that firms that disclose salary expense receive a lowered cost of capital if they are disclosing more stable cost structures, and the value of this disclosed information relates to the relative risk associated with the disclosed cost structures. I also find the propensity for firms to initiate disclosure increases as more analysts follow the firm and these initiating firms receive a lower cost of capital in exchange for their initial disclosure. Additionally, this lower cost of capital for initial disclosers is not based on the relative stability of the disclosed cost structure.

Name thesis:degree_name

Doctor of Philosophy

Level thesis:degree_level

doctoral

Discipline thesis:degree_discipline

Accounting and Information Systems

Department dc:contributor.department

Accounting and Information Systems

Grantor dc:publisher

Virginia Tech

Year dc:date.issued

2020

Author dc:creator

• Sherman, Christopher Michael

Chair dc:contributor.committeechair

• Lisic, Ling Lei

Committee members dc:contributor.committeemember

• Johnson, Eugene Scott
• Vance, Marshall David
• Erickson, Matthew James
• Xu, Jin

• Voluntary Disclosure
• Employee Pay Disclosure
• Salary Expenses
• Cost of Capital

Statement dc:rights

• In Copyright

Licence dc:rights.uri

• http://rightsstatements.org/vocab/InC/1.0/

Dc Identifier Other

vt_gsexam:24645

OAI identifier oai:identifier

oai:vtechworks.lib.vt.edu:10919/97569