In a study that could reshape how maritime companies approach financial transparency, researchers have uncovered a nuanced relationship between disclosure levels and the cost of equity capital (COE) in Egypt. The research, led by Sameh O. Yassen from the Department of Accounting at South Valley University, Egypt, and published in the journal Heliyon, sheds light on how different types of disclosures impact the cost of capital, offering valuable insights for maritime businesses operating in emerging markets.
The study, which analyzed data from 73 companies over a nine-year period, used advanced statistical methods to isolate the causal effects of disclosure practices on COE. This is crucial for maritime professionals, as the sector often operates in complex regulatory environments with varying disclosure requirements.
So, what did they find? Well, it’s a bit of a mixed bag. On one hand, voluntary disclosure—think of it as companies proactively sharing information beyond what’s required—was found to be inversely related to COE. In simpler terms, the more a company voluntarily discloses, the lower its cost of equity capital. This makes sense; transparency builds trust, and trust can attract investors at a lower cost.
On the other hand, mandatory disclosure—those regulatory requirements that companies must adhere to—was positively correlated with COE. This suggests that while mandatory disclosures are necessary, they might not be as effective in reducing capital costs. In fact, they could even increase them due to potential inefficiencies or over-compliance costs.
“Our findings reveal a complex relationship where voluntary disclosure is inversely related to COE, suggesting that increased transparency may reduce capital costs,” Yassen explained. “Conversely, mandatory disclosure is positively correlated with COE, indicating potential inefficiencies or over-compliance costs.”
For maritime companies, this research highlights the importance of striking the right balance between voluntary and mandatory disclosures. By enhancing voluntary disclosure practices, companies can potentially reduce their cost of capital, making them more attractive to investors. This is particularly relevant in the maritime sector, where capital-intensive projects are the norm.
Moreover, the study’s findings can guide policymakers in improving mandatory reporting practices. By streamlining requirements and focusing on what’s truly valuable to investors, regulators can help reduce unnecessary compliance costs, ultimately strengthening the market.
In the competitive world of maritime business, every advantage counts. This research offers a roadmap for companies and regulators alike, paving the way for more informed decision-making and, ultimately, a stronger, more attractive market for global investors. As Yassen puts it, “Enhanced understanding of these dynamics can lead to more informed policymaking and investment strategies that bolster market strength and attract global investment.”
So, whether you’re a maritime executive, a policymaker, or an investor, this study is a must-read. It’s not just about numbers and statistics; it’s about understanding the power of transparency and how it can shape the future of the maritime industry.