Conditional Accounting Conservatism Lessens the Cost of Capital: Evidence from Non-Financial Sector of Pakistan

Purpose: The study looked at the effect of corporate governance on the cost of capital of firms in Pakistan's non-financial sector. Design/Methodology/Approach: The study sample is comprised of balanced data set of 175 non-financial companies listed on the Pakistan Stock Exchange between 2008 and 2018. The study used the dynamic panel GMM estimator technique. Findings: The findings revealed that an increase in the number of directors, board independence, CEO duality, and inflation negatively influence the cost of capital. On the other hand, the increase in institutional holdings increased the cost of capital. In addition, it is discovered that board committees, political connections, and economic growth do not affect the cost of capital Implications/Originality/Value: When board size, CEO duality, board independence, and inflation increased, the cost of capital decreased in Pakistan's non-financial sector. Furthermore, board committees, political connections, company leverage, and economic growth do not affect the cost of capital in Pakistan's non-financial sector. In comparison, an increase in institutional shareholding increased the cost of capital in Pakistan's non-financial sector.

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The Impact of Accounting Conservatism and Voluntary Disclosure on the Cost of Capital of Industrial Companies in Jordan

Accounting and Finance Research ◽

10.5430/afr.v6n1p102 ◽

2017 ◽

Vol 6 (1) ◽

pp. 102 ◽

Cited By ~ 1

Author(s):

Heba S Warad ◽

Prof. Dr. Mamoun M Al-Debi'e

Keyword(s):

Voluntary Disclosure ◽

Small Firms ◽

Cost Of Capital ◽

Negative Impact ◽

Accounting Conservatism ◽

Full Sample ◽

Industrial Companies ◽

Significant Negative Impact ◽

The Cost ◽

The Impact

This study aims at examining the impact of accounting conservatism and voluntary disclosure on the cost of capital of industrial companies in Jordan during the period (2009-2013). Panel OLS regression analysis was employed to test the hypotheses of the study. The results of the full sample model revealed that accounting conservatism and voluntary disclosure have significant negative impacts on the firms’ cost of capital.Furthermore, the results of the sub-samples which distinguish between large and small, as well as between high and low leverage firms showed that the sub-sample of large and small firms conforms to the full sample results. Across the sub-sample of high leverage firms, the results showed that only voluntary disclosure has a significant negative impact on the firm’s cost of capital. On the other hand, only accounting conservatism has a significant negative impact on the firm’s cost of capital across the sub-sample of low leverage firms.

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