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Discretionary accruals quality, cost of capital, and diversification


Journal of Accounting, Auditing and Finance



Authors / Editors

Demirkan S;Radhakrishnan S;Urcan O

Publication Year



This study examines the discretionary accruals quality of single- and multiple-segment firms. The authors hypothesize and find that the discretionary accruals quality is lower for multiple-segment firms than single-segment firms, and for the same level of discretionary accruals quality, the cost of capital is higher for multiple-segment firms than single-segment firms. These findings suggest that more severe agency problems in multiple-segment firms compared with single-segment firms may lead to poor discretionary accruals quality and agency risk is priced-in as a higher cost of capital.


cost of capital; discretionary accruals quality; diversification discount; agency costs

Available on ECCH


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