The moderating effect of accounting conservatism on the relationship between information asymmetry and cost of capital: An empirical study on the industrial companies listed on the GCC markets

Authors

Muiz Abu Alia, Bahaa Mashni, Yazan Mashaqi, Dania Mezied

 

Abstract

The aim of this study is to identify the moderating effect of accounting conservatism on the relationship between information asymmetry and cost of capital. Since this issue is almost neglected in the emerging markets, especially in the Arab countries, the study uses data belongs to the industrial companies listed on the exchanges of the Gulf Cooperation Council (GCC) countries covering the 2015-2021 period. The results show that accounting conservatism moderates the positive effect of information asymmetry on the cost of capital. Therefore, companies may reduce cost of capital by decreasing information asymmetry and enhancing the use of conservative accounting practices. In particular, the level of disclosure and the efficiency of governance should be enhanced. Regulators can significantly contribute in this regard by issuing relevant regulations and improving the oversight over companies. Finally the study provides insights to be considered in the future research.

DOI: 10.51958/AAUJBL2024V8I1P7