The Impact of Earnings Quality on the Cost of Equity: Evidence from Privatized Firms

Hamdi Ben-Nasr and Abdullah Mohammed Al-Dakheel

International Journal of Financial Research, 2015, vol. 6, issue 1, 68-78

Abstract: In this paper, we examine whether earnings quality affects cost of equity in privatized firms. Using a multinational sample of firms privatized in developing and industrialized countries, we find strong, robust evidence that the cost of equity is positively related to the absolute value of abnormal accruals. This finding suggests that firms with lower earnings quality are penalized with a higher cost of equity.

Keywords: earnings quality; abnormal accruals; cost of equity; privatization (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:6:y:2015:i:1:p:68-78

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