Pages: 126-138

Abstract

The present study aims to investigate the effect of accruals on return and cost of capital. Accordingly, by analyzing information of 92 companies over a period of 8 years from 2008 to 2015, the researcher seeks to study the effect of accruals quality on the returns and capital cost of the companies listed in Tehran Stock Exchange. Tadbirpardaz, Rah Avard-e Novin, Eviews and SPPS were used for analyzing the hypotheses. The results of hypothesis analysis indicate that accruals quality has different impacts on the capital cost components. Accruals have a positive and significant effect on the cost of equity, which increases the cost of internal resources provision, while there is no significant relationship between the accruals quality and costs. Moreover, the findings show that the quality of accruals leads to increased return on the companies’ market and the relationship between these two factors is positive and significant. Finally, the results of the Fama-French three-factor model analysis demonstrate that accruals quality cannot explain stock returns (equity premium) to assess companies’ returns, and statistically, there is no meaningful relationship between accruals quality and risk premium in the Fama-French three-factor model.