Corporate Governance Accountability And Cost Of Equity Capital: Evidence From Nigeria Quoted Companies
Dr Olaoye Festus Oladipupo
Department of Accounting, Ekiti State University, Ado-Ekiti, Nigeria
Omodara Vincent
Department of Accounting, Ekiti State University, Ado-Ekiti, Nigeria
Keywords: Cost of equity, corporate governance, financial information quality
Abstract
The study examined the impact of corporate governance (CG) accountability attribute of financial information quality on cost of equity capital (CoEC) of quoted firms on the Nigerian Stock Exchange (NSE). A set of 20 quoted firms have been investigated to analyze the relationship for the period 2016-2020. Secondary data were used in the study, as sourced from the annual reports of the firms. Financial information quality was measured by abnormal accruals, financial transparency and independence of audit committee. The Dechow and Dichev, (2002) Model was used to determine the discretionary accruals, Collins and Kothari, (1989) model was used to determine financial transparency while Capital Asset Pricing Model (CAPM) was used to determine cost of equity. Data collected were analyzed using correlation analysis and ordinary least square estimation. The result showed that cost of equity is positively related to the value of abnormal accruals. The study also established a positive insignificant interrelationship between financial transparency and cost of equity of the sampled firm in the study while the positive relationship between auditor independence and cost of equity was insignificant. The study concluded that financial transparency has mild tendency of impeding cost of equity. Also, auditor independence can affect the cost of equity; and thus, auditor independence is a factor that influences firm’s cost of equity in Nigeria. Hence, it was recommended that management of quoted firms should encourage their managers to pay greater attention to the quality of financial information, so also, the management of quoted firms in Nigeria should ensure audit independence and adequate training of audit committee members in line with global best practices.