| Summary: | 碩士 === 東吳大學 === 會計學系 === 103 === In recent years, domestic and foreign companies malpractice continue to occur. The main problem in information quality of financial statements is considered the merits of more volatility in capital markets. In various factors like earning quality, company management whether to use discretionary accruals to achieve earnings manipulation on the financial statements, or asymmetric information will affect cost of capital of companies. In other words, that is the expected return required by investors.
The study is discussion on earnings transparency and cost of capital. Using the reciprocal of EP ratio measures cost of capital. According to Barth et al. (2013) two-step estimation procedure measures earnings transparency and our earnings transparency is the sum of the explanatory powers from that firm-year’s earnings -returns relations estimated in the two steps.
The result appears cost of capita significantly negatively associated with earnings transparency. In other words, high earnings-returns relation show high earnings transparency, and then investors will not spend more cost to find other information, so investors will expect lower returns.
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