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The effect of ex ante and ex post conservatism on the cost of equity capital: A quantile regression approach for MENA countries

Maha Khalifa, Hakim Ben Othman and Khaled Hussainey

Research in International Business and Finance, 2018, vol. 44, issue C, 239-255

Abstract: This paper aims to provide a deeper understanding of the relationship between accounting conservatism and the cost of equity capital (COEC). For this purpose, we use the quantile regression (QR) framework and examine the effect of two dimensions of conservatism (ex ante and ex post) on the COEC. This methodological contribution allows us to test whether the effect of the two forms of conservatism vary across the full distribution, especially at the extreme quantiles of the COEC. Empirical results from the QR reveal that the effect of the two dimensions of conservatism considerably differs across COEC quantiles.

Keywords: Accounting conservatism; Cost of equity capital; Ex ante conservatism; Ex post conservatism; Quantile regression; MENA countries (search for similar items in EconPapers)
JEL-codes: G10 G15 G18 G30 G32 G38 M41 M48 (search for similar items in EconPapers)
Date: 2018
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