Investigation the Effects of management earning forecasts on the cost of equity capital

Subject Areas : Journal of Investment Knowledge

Azita Jahanshad ¹ , Mohsen Zardkouhi ²

1 - Assistant Professor, Islamic Azad University‚ South Tehran Branch (Corresponding Author)
2 - Master of accounting

Received: 2012-06-30 Accepted : 2012-10-01 Published : 2012-10-01

Keywords: cost of equity capital, earning forecasts positive adj, earning forecasts negative adj,

Abstract :

The main object of this study is investigation of effectiveness state of earning forecasts news on the firms cost of equity capital and look for answer to this question that is the cost of equity capital affected importantly by forecasts negative or positive adjustment news or not?  at this course tried to more over than separated effects of forecasts positive adjustment news or negative adjustment news on the cost of equity capital, investigate the symmetrical or asymmetrical effects of these  two types of news on the cost of equity capital. for this purpose four hypothesis compiled and examined with use of gathered data from statistical samples include 132 firms at time period from 1385 to 1389by put panel and compound data regression method into operation Resulted Experimental evidences from this research indicated that both forecasts negative and positive adjustment news affected the firms cost of equity capital in the manner that negative adjustment news have increasing effect and positive adjustment news have decreasing effect on the cost of equity capital. The results also indicated that effect measure of negative adjustment news on the cost of equity capital have been more than positive adjustment news. In addition the investigations indicated that for descending profitability trends, management’s preemption in issue of earning forecasts negative adjustment news was modifying the really earning declare effect on the cost of equity capital.