VOLUNTARY DISCLOSURE STRATEGIES AND THE COST OF CAPITAL OF ITALIAN BLUE CHIPS

How do Italian blue chips actually deal with disclosure about their business model? Does their disclosure strategies affect the cost of capital through a reduction of the information risk premia? The paper identifies four different disclosure strategies through a cluster analysis on the contents of the annual reports, the investor relations and press releases of a set of Italian Blue Chips in 2003. The it uses an original model to extract the information risk premia from the time series of stock prices and trading volumes time. The level of information risk premia is split between market-related and firm-specific drivers to permit the estimation and discussion of the correlation with trading volume and the different disclosure strategies identified. Overlaps from results in cluster analysis and information risk premia determinants let us conclude that broad and exhaustive financial communication allows reduction of the cost of capital.