The Empirical Test of Comparing the Cost of Equity Capital Efficiency under Information Ambiguity and Value Relevance of Earning

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Khodaparast Salekmoalemy Abbas; REZAEI FARZIN; KHERADYAR SINA; Vatanparast Mohammadreza

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Journal: THE IRANIAN ACCOUNTING AND AUDITING REVIEW Year:2020 | Volume:26 | Issue:4 Page(s): 499-516

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Title

The Empirical Test of Comparing the Cost of Equity Capital Efficiency under Information Ambiguity and Value Relevance of Earning

Author(s)

Khodaparast Salekmoalemy Abbas | REZAEI FARZIN | KHERADYAR SINA | Vatanparast Mohammadreza | Issue Writer Certificate

Keywords

Cost of common stockQ2

Information ambiguityQ1

Value relation of earningQ1

Corporate Fundamental CharacteristicsQ1

Abstract

Objective: The Cost of common stock is called the minimum expected rate of return of investors. The Cost of common stock is one of the most important means in many financial and management decisions, that are influenced by several factors like liquidity, financial leverage, operating cash flow, company size and profitability. Information ambiguity increases the investment risk and make the cost of equity capital increased. Growth of value relevance of earning decreases the investment risk and consequently make the Cost of common stock decreased. Therefore, the purpose of this study is to present an empirical test to compare the efficiency of two cost of capital models as Gordon and Olson Junter under the influence of Information ambiguity and value relevance of earning. Methods: For this purpose, this study was conducted with 104 sample companies during 7 years from 2012 to 2018, using descriptive analysis with Kruskal Wallis test. Results: To this end, this study was concluded that two models of Olson Junter and Gordn have accepted reliability index and validity at different level. There is significant difference between two models. Conclusion: The results showed that Olson Junter's model performs more efficient than Gordon's model at high-low risk levels. Consequently, Cost of common stock of the former model would be useful in decision making through portfolio hedging og potential losses.

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APA: Copy

Khodaparast Salekmoalemy, Abbas, REZAEI, FARZIN, KHERADYAR, SINA, & Vatanparast, Mohammadreza. (2020). The Empirical Test of Comparing the Cost of Equity Capital Efficiency under Information Ambiguity and Value Relevance of Earning. THE IRANIAN ACCOUNTING AND AUDITING REVIEW, 26(4 ), 499-516. SID. https://sid.ir/paper/8130/en

Vancouver: Copy

Khodaparast Salekmoalemy Abbas, REZAEI FARZIN, KHERADYAR SINA, Vatanparast Mohammadreza. The Empirical Test of Comparing the Cost of Equity Capital Efficiency under Information Ambiguity and Value Relevance of Earning. THE IRANIAN ACCOUNTING AND AUDITING REVIEW[Internet]. 2020;26(4 ):499-516. Available from: https://sid.ir/paper/8130/en

IEEE: Copy

Abbas Khodaparast Salekmoalemy, FARZIN REZAEI, SINA KHERADYAR, and Mohammadreza Vatanparast, “The Empirical Test of Comparing the Cost of Equity Capital Efficiency under Information Ambiguity and Value Relevance of Earning,” THE IRANIAN ACCOUNTING AND AUDITING REVIEW, vol. 26, no. 4 , pp. 499–516, 2020, [Online]. Available: https://sid.ir/paper/8130/en

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