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

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  • Hamdi Ben-Nasr
  • Abdullah Mohammed Al-Dakheel

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.

Suggested Citation

  • Hamdi Ben-Nasr & Abdullah Mohammed Al-Dakheel, 2015. "The Impact of Earnings Quality on the Cost of Equity: Evidence from Privatized Firms," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 6(1), pages 68-78, January.
    • Handle: RePEc:jfr:ijfr11:v:6:y:2015:i:1:p:68-78
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