EFFECT OF ACCRUAL QUALITY ON COST OF CAPITAL OF LISTED NON-FINANCIAL FIRMS IN NIGERIA
Suleiman A. S. Aruwa, Jibrin Attayi Abdul, Hauwa’u Muhammad Mainoma and Aliyu Muhammad Nasir
Volume 3 Issue 2
Abstract
The study analyzes the effect of accrual quality on the cost of capital of listed non-financial firms in Nigeria for the period of 2012 to 2019. Data for the study were extracted from the Firms’ annual reports and accounts. After running the OLS regression, a robustness test was conducted for the validity of statistical inferences. The independent variables were generated using two steps regression to determine the performance adjusted accrual and working capital accrual of the sample Firms. Multiple regression was employed to run the data of the study using a fixed-effect model. The results from the analysis revealed that performance-adjusted accrual has a positive insignificant effect on the cost of capital of listed non-financial firms in Nigeria. While working capital accrual has a positive significant effect on the cost of capital of listed non-financial firms in Nigeria. In line with the findings, the study recommends that investors of listed non-financial firms in Nigeria should have confidence in the quality of accrual earnings presented by managers because the information risk inherent in accruals quality will not affect the expected rate of return. Keywords: Accrual Quality, Performance Adjusted Accrual Working Capital Accrual, Cost of Capital
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