Publication Type
PhD Dissertation
Version
publishedVersion
Publication Date
6-2025
Abstract
This dissertation tackles a core challenge in corporate finance — how firms can optimise both their capital structure decisions and the way those decisions are communicated to investors. It shows that while financial responsiveness (SOA) and transparency each help lower a firm’s implied cost of capital (ICC), the most meaningful reduction occurs when both are present and working together. For CFOs, the research offers a practical way to connect capital structure planning with communication strategy to improve market understanding and reduce financing costs. For investors and analysts, it introduces the idea of a transparency–SOA alignment measure to better assess firm credibility and value.
Building on this motivation, the dissertation investigates how a firm’s ICC is influenced by the interaction between SOA toward target leverage — and financial transparency. It develops and tests a triadic empirical framework that brings these elements together within a large-sample panel of U.S.-listed firms.
The empirical findings demonstrate that both SOA and transparency independently reduce ICC, consistent with theories of financial discipline and information asymmetry mitigation. More critically, transparency amplifies the valuation impact of SOA, highlighting that operational discipline is rewarded more when investor understanding is strong. Firms that simultaneously exhibit high transparency and high financial responsiveness achieve the lowest implied cost of capital, reinforcing the need to align financial strategy with credible communication.
Keywords
Transparency, Speed of Adjustment, Implied Cost of Capital, Financial Responsiveness, Capital Structure, Triadic Framework
Degree Awarded
Doctor of Business Admin
Discipline
Corporate Finance | Finance and Financial Management
Supervisor(s)
TEE, Chyng Wen; SEQUEIRA, John Martin
First Page
1
Last Page
125
Publisher
Singapore Management University
City or Country
Singapore
Citation
LEONG, Yung Chee.
Exploring how the high or low of firm transparency and speed of adjustment in its capital structure relates to the implied cost of capital of a firm. (2025). 1-125.
Available at: https://ink.library.smu.edu.sg/etd_coll/777
Copyright Owner and License
Author
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.