A survey of risk-relevance of accounting data using cost of equity capital and systematic risk measures

The main goal of this research is to investigate the usefulness of accounting variable in assessing the systematic risk and cost of equity capital for company listed in Tehran stock exchange. In line with this goal, 40 companies were selected for which the information required for the 7-year research period (82-88) was available. Variables which are tested include financial leverage, operating liability leverage, variance of profit margin, asset turnover, growth and borrowing cost. Two statistical techniques, simple regression and multiple regressions were used to test the hypothesis and finally, “backward elimination method” was employed to find the optimum model. The significance of the models was tested according to T-Test and F- test. By using simple regression analysis, the results showed that, there is a significant relationship between financial leverage, variance of profit margin, asset turnover and the systematic risk. But none of them significant relationship between accounting variables and the cost of equity capital. With respect to the design of the final model for estimating systematic risk and cost of equity capital, none of accounting variables remained.