Cost of equity and disclosure of management's responsibility for financial reports of firms in Thailand

Abstract

Increased disclosures of firm-related information help decrease the cost of capital of firms. This study tests the disclosure proposition by investigating the relationship between the voluntary disclosure of the statement of management's responsibility for financial reports (MRF) and the cost of equity in firms listed on the Stock Exchange of Thailand during the years of 2013–2015. The results show that firms with MRF have lower cost of equity than firms without MRF because voluntary disclosures of MRF reduce information asymmetry and estimation risks. The empirical evidence serves as a guideline for the Securities and Exchange Commission in making decisions regarding the requirement of disclosing management responsibilities on the financial reports for listed companies, in compliance with the Sarbanes-Oxley Act.