Property crime, earnings variability, and the cost of capital

James Brushwood, Dan Dhaliwal, Douglas Fairhurst, Matthew Serfling

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

We show that firms located in states where property crime is more prevalent have more uncertain earnings and higher financing costs. Specifically, firms located in states with higher property crime rates have more volatile and less persistent earnings as well as lower quality analysts' earnings forecasts. Firms located in states with higher property crime rates also have a higher cost of equity and debt capital. These results are robust to accounting for econometric and endogeneity concerns in various ways. Overall, our results suggest that a potentially large and overlooked cost of crime is a higher cost of capital.

Original languageEnglish (US)
Pages (from-to)142-173
Number of pages32
JournalJournal of Corporate Finance
Volume40
DOIs
StatePublished - Oct 1 2016

Keywords

  • Cost of debt
  • Cost of equity
  • Earnings variability
  • Property crime
  • Theft

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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