Audit Committee Characteristics and Cost of Equity Capital

Document Type : Research Paper

Authors

1 MSc. Student of Accounting, Islamic Azad University, Damavand Branch, Damavand, Iran

2 Assistant Professor of Accounting, Imam Khomeini International University, Qazvin, Iran,

Abstract

Financing and determining the proper structure of capital is one of the most important duties of firms in order to maximize the firm value by minimizing the cost of capital. Several factors, including corporate governance, affect a firm's risk which in turn affects the cost of capital. The audit committee, as one of the most important elements of corporate governance, has a significant role in improving financial reporting and risk management. This study is aimed to investigate the relation between some characteristics of the audit committees and the cost of equity capital in 97 firms listed in Tehran Stock Exchange and OTC of Iran during the period from 2012 to 2017.  Results of the research hypotheses test show that there is a significant negative relation between the audit committee size and the cost of equity capital. In other words, firms with more committee members have less cost of equity capital. Findings also show that there is no significant relation between the financial expertise of the audit committee members and the cost of equity capital. In addition, there is a significant negative relation between the firm size and the cost of capital. In other words, top large firms have less cost of equity capital.

Keywords

Main Subjects

References

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History

  • Receive Date: 27 August 2018
  • Revise Date: 03 November 2018
  • Accept Date: 10 November 2018

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