The Effect of Information Quality on Systematic Risk and Cost of capital

Financial reporting aims to provide creditors with right economic decisions. Economic decisions are associated with optimum allocation of resources and investment in the stock. Capital markets pave the way for right decision in the field of investment. Regarding the fact that expected risk and return are influential in achieving the firms’ objectives, risk control receives increasing attention among creditors and active people in financial fields. Thus, the present study intends to assess the effect of accounting information quality on systematic risk and capital cost (expected return). Earning quality is considered as a criterion for measuring accounting information quality. For this purpose, 150 listed companies in Tehran Stock Exchange have been examined over a period from 2009 to 2013. Multiple regression technique has been applied to test research hypotheses. Panel data analysis and the obtained findings have indicated that reported information of higher quality leads to less systematic risk and cost of capital.