Title: Earnings quality and cost of equity capital: evidence from Tunisia

Authors: Triki Fatma, Omri Abdelwahed

Addresses: Research Unit: Finance and Strategy of Businesses, Institute of Higher Management of Tunis, 41 Rue de la Liberte, Bouchoucha, Bardo 2000, Tunis, Tunisia. ' Research Unit: Finance and Strategy of Businesses, Institute of Higher Management of Tunis, 41 Rue de la Liberte, Bouchoucha, Bardo 2000, Tunis, Tunisia

Abstract: This article identifies the relation between earnings quality and the cost of equity capital of Tunisian listed firms. Using the Fama and French|s (1993) model, we find that there is a statistically significant relationship between our proxies of earnings quality and cost of equity capital. This result supports theoretical models predicting that investors are interested in information that reflects correctly the firm|s financial situation. The absence of information asymmetry encourages them to diversify their portfolio, reducing by that the cost of equity capital.

Keywords: earnings quality; equity capital costs; Tunisian listed firms; Tunisia; information asymmetry; porfolio diversity.

DOI: 10.1504/IJMFA.2010.033289

International Journal of Managerial and Financial Accounting, 2010 Vol.2 No.2, pp.161 - 176

Published online: 20 May 2010 *

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