Preliminary communication

IMPACT OF EARNINGS QUALITY ON FINANCING COSTS

Marija Vuković orcid.org/0000-0002-5383-6587 ; Sveučilište u Splitu
Slavko Šodan orcid.org/0000-0002-5043-6801 ; Sveučilište u Splitu

Abstract

This paper investigates whether creditors and company owners recognize greater financial reporting quality and reward those companies with lower cost of financing. Quality and transparent reporting enables owners and potential investors to accurately estimate future cash flows of the company, the value of the company and it reduces the risk of making the wrong investment decisions. Also, creditors can more accurately determine the actual credit ability and indebtedness of the company based on true and fair financial statements. Accordingly, it is assumed that creditors and owners will reward the companies with higher quality financial reporting with lower financing costs. The research was conducted on a sample of companies listed on the capital market in seven Southeastern European countries. Multiple regression models have been used in the analysis of results, which showed that the quality of financial reporting in those Southeastern European countries affects the reduction of debt, but not the cost of capital.

Keywords

earnings quality; financing cost; corporate governance; information asymmetry; accruals

Hrčak ID:

191301

URI

https://hrcak.srce.hr/191301

Publication date:

21.12.2017.

Article data in other languages: croatian

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