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|a It is contended among the accounting researchers that information asymmetry could be reduced through disclosure of information pertaining to quality of earnings and recognition of intellectual capital. Correspondingly, this study examined the relationship between accounting earnings attributes i.e. relevance and conservatism of earnings and cost of equity. This study included an investigation of the moderating effect of intellectual capital on (i) the relationship between earnings and book value (individually and aggregate) and market price, and (ii) the relevance of earnings and cost of equity. The data for the study were based on annual financial reports, Datastream and Bloomberg of firms from the Technology, Trading and Services, Consumer Products and Hotel sectors listed in the main board of Bursa Malaysia from 2006 to 2010. The study employed multiple and moderated multiple regression to analyse data. The results showed that, firstly, firms with high quality of relevance of earnings benefit more from lower cost of equity and there is no relationship between conservatism of earnings and cost of equity, Secondly, the moderating of intellectual capital has an effect on the relationship between earnings and book value with market price. Lastly, the findings showed that intellectual capital has a moderating effect on relevance of earnings and cost of equity. This study contributes to the valuation theory through extension of Ohlson model by the inclusion of new-knowledge of intellectual capital. Besides that, it contributes to the understanding of signaling theory through the explanation of the moderating effect of intellectual capital on the relationship between relevance of earnings and cost of equity. The findings of the study has shown the importance of intellectual capital and it is recommended that accounting standard setting authorities must pave the avenue for the disclosure of intellectual capital in a firm?s annual financial report.
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