The Moderating Effect of Information Asymmetry and Imperfect Market on the Impact Severity of Comparability and Accounting Consistency on the Cost of Equity Capital in Listed Companies in Tehran Stock Exchange

Comparability is a key tenet of accounting because it allows users of financial statements to benchmark a firm against similar firms when distinguishing between alternative investment opportunities. The purpose of the present study is to investigate the effect of information asymmetry and imperfect market on the impact severity of comparability and accounting consistency on the cost of equity capital in listed companies in Tehran Stock Exchange. The sample consists of 111companies in the period 2010-2017. accounting consistency has been measured by employing the text mining and vector space model. For testing hypotheses, multivariable regression model and compound data (with year and industry effects control) have been used. The findings show that the comparability and accounting consistency has a significant negative effect on the cost of equity capital. The results also show that information asymmetry and imperfect market increase the severity of the negative impact of comparability and accounting consistency on cost of equity capital. These findings imply that investors and users of financial information in the Iranian capital market should pay particular attention to the importance of comparability as a between-firm measure of the quality of accounting information because investors consider the comparability of information and it impacts. By the cost of equity capital, they can predict their expected returns more accurately and select the optimal investment portfolio.