efficient market hypothesis and the cost of capital

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The quote shows a strong relation to the efficient market hypothesis (EMH), as it implies that the costs of capital are dependent from the amount of information given by the company. According to my opinion, agency theory is a good explanation for costs of capital. Agency theory defines contracts as under which one party – called principal – engages another party – called the agent – to perform service on the principal’s behalf. Concluding, the principal delegates decision-making …

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…Hancock, pp. 306-309, Murdoch University, Perth, Western Australia. Siegel J. G. and Shin J. K. (1995), Dictionary of Accounting Terms, Baron’s, New York. Snowball, D., (1980), On the Integration of Accounting Research on Human Information Processing, cited Financial Accounting III (Second Semester 1998), Ed. Phil Hancock, pp. 50-62, Murdoch University, Perth, Western Australia. Solomons, D., (1986), The FASBs Conceptual Framework: An Evaluation, cited Financial Accounting III (Second Semester 1998), Ed. Phil Hancock, pp. 96-103, Murdoch University, Perth, Western Australia.