A Study of the Relationship between Accrual Quality and Costs of Capital
Date Issued
2007
Date
2007
Author(s)
Jhuang, Sheng-Jie
DOI
en-US
Abstract
This paper uses accrual quality to proxy for information risk, which is used to investigate its relationship with costs of capital. There are three perspectives to address this issue: firm costs of debt, firm costs of equity, and industry costs of capital. This paper especially extends the research scope to industry costs of capital which is inspired by credit reports of the rating agency.
The results show that firms with poorer accruals quality have higher costs of equity. But the association between accrual quality and firm costs of debt is not significant. For industry costs of capital, the effects of accrual quality are also not significant. However, the sensitivity to information risk related to accrual quality varies a lot among industries.
The Electronic industry is more sensitive to information risk than traditional industries such as Food and Plastic industry. This paper finds that the industry operating history has significantly negative effects on its sensitivity to information risk. And further finds whether different sources of accruals quality have different pricing effects on costs of capital.
Keyword: Information risk, accrual quality, firm costs of capital, industry costs of capital.
Subjects
應計品質
公司資金成本
產業資金成本
Information risk
accrual quality
firm costs of capital
industry costs of capital
Type
other
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