Document Type: Original Article


1 Department of Accenting, Science and Research Branch, Islamic Azad University, Golestan, Iran

2 Department of Accounting and Management, Islamic Azad University, Aliabad Katool Branch, Aliabad Katool, Iran


In this study, we examined the relationship between quality of disclosure and cost of capital. The present study has addressed the issue of whether reduction of disclosure quality increases the cost of capital? The survey included all the companies listed on the Stock Exchange of Tehran. A total of 50 participants were selected and have been examined during the period of 2006 to 2011. Panel least squares regression analysis was used to test hypotheses and estimating the coefficients. Corporate disclosure quality in annual concessions for listed companies in Tehran Stock Exchange is used to measure the disclosure quality. The results indicate that there is the 95% confidence level and a significant negative relationship between disclosure quality and cost of capital. In fact, decline in the disclosure quality as a result of increased information asymmetry caused the investors try more to gain access to confidential information. With the increase in information asymmetries, transaction costs and increased liquidity of company’s stock shares decrease and this will be followed by the increase in the demand for the firm's cost of capital.


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