These findings suggest that the market differentiates between exploration and exploitation information in addressing information risk, more so than previously assumed. We also find that the combined disclosure is negatively associated with cost of equity capital, with the sub-population of R&D-active firms particularly accruing synergies from combined disclosure of both exploration and exploitation. However, the bulk of market benefits are driven by exploitation rather than exploration disclosures-except for R&D-active firms that are rewarded for exploration disclosure. Based on longitudinal data of the UK FTSE 350 firms from 2011–2016, we show that firms tend to disclose more information related to exploration than exploitation. However, we contend that disclosure of exploration and exploitation innovation activities could convey potentially paradoxical expectations about a firm's future value. We build on theory that presupposes that the information disclosed by a firm about its innovation activities will reduce information risk of investors. We draw on information risk theory and paradox theory to examine the additive and combined effects of disclosing exploration and exploitation information on cost of equity capital.
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