Direct and Joint Effects of Earnings Quality and Integrated Reporting on the Cost of Capital

Document Type : Original Article

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Accounting Department Faculty of Commerce Alexandria University Alexandria Egypt

Abstract

Integrated reporting is a new tool of reporting that makes financial reporting more comprehensive and transparent by incorporating financial and non-financial information in one report. Although integrated reporting has gained more attention from the academic perspective in the last few years, only few studies have focused on the relationship between integrated reporting, and the cost of capital. Moreover, according to the researcher's knowledge, the contributions of the joint effect of earnings quality and the integrated reporting on the cost of capital are rare. Hence, this study examines the direct and joint effects of earnings quality and integrated reporting on the cost of capital for a sample of 81 companies listed on the EGX 100 with 324 observations for the period 2016-2019. The results show that higher earnings quality decreases the cost of debt and cost of capital. Further, the examination shows a significant negative association between integrated reporting and both the cost of equity and cost of capital. Additionally, the relationship between earnings quality and cost of capital and the association between integrated reporting and cost of debt do not support the research hypotheses. Finally, companies with higher earnings quality and integrated reporting bear a lower cost of capital.

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