2012 Fiscal Year Final Research Report
The empirical relationship between earnings quality, cost of equity capital, and cost of debt
| Project/Area Number |
21730370
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| Research Category |
Grant-in-Aid for Young Scientists (B)
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| Allocation Type | Single-year Grants |
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| Research Field |
Accounting
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| Research Institution | Kobe University |
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Principal Investigator |
KITAGAWA Norio 神戸大学, 経営学研究科, 准教授 (80509844)
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| Project Period (FY) |
2009 – 2012
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| Keywords | 利益の品質 / 情報リスク / 株式資本コスト / 負債コスト |
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| Research Abstract |
The purpose of this research is to investigate the relationshipbetween accounting earnings quality, cost of equity capital, and cost of debt. As a result of analyses, I find the following evidences.
(1) Firms with higher earnings volatility, that is low earnings quality, experience higher cost of equity capital.
(2)General proxies for earnings quality, that is, accruals quality, earnings persistence, earnings predictability, and earnings smoothness have negatively correlated with bond yield spread.
(3) Proxies for earnings quality, that is, accruals quality, earnings predictability, and earnings smoothness have negatively correlated with idiosyncratic risk.
(4) Quality of management forecast earnings measured by management forecasterrors have negative correlations with idiosyncratic risk.
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