Discretionary accruals quality, cost of capital, and diversification
Journal
Journal of Accounting, Auditing and Finance
Subject
Accounting
Publishing details
Publication Year
2012
Abstract
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.
Keywords
cost of capital; discretionary accruals quality; diversification discount; agency costs
Available on ECCH
No
