The Effect of Level of Disclosure And Audit Quality On The Cost of Equity Capital Moderated By Financial Distress Prediction

International Journal of Economics and Management Studies

© 2020 by SSRG - IJEMS Journal

Volume 7 Issue 11

Year of Publication : 2020

Authors : Laras Rayi Saraswati, Haryono Umar, Rahima Br. Purba

10.14445/23939125/IJEMS-V7I11P109

How to Cite?

Laras Rayi Saraswati, Haryono Umar, Rahima Br. Purba, "The Effect of Level of Disclosure And Audit Quality On The Cost of Equity Capital Moderated By Financial Distress Prediction," SSRG International Journal of Economics and Management Studies, vol. 7,  no. 11, pp. 58-64, 2020. Crossref, https://doi.org/10.14445/23939125/IJEMS-V7I11P109

Abstract:

The present research investigated the prediction of bankruptcy (financial distress) as a factor that can moderate the level of disclosure (annual report disclosure) and audit quality on the cost of equity capital. Bankruptcy prediction (financial distress) was analyzed using the first Altman model (Z-score). Meanwhile, to test the level of financial reporting (disclosure), this study examined the 5 elements used in Botosan's research (1997). The results of this study revealed that: 1) the level of disclosure in manufacturing companies in Indonesia affects the cost of equity capital, 2) audit quality has no effect on the cost of equity capital, 3) prediction of financial distress moderates the relationship between the level of disclosure and the cost of equity capital and the relationship between audit quality and the cost of equity capital.

Keywords:

Bankruptcy; Level of the disclosure; Cost of equity capital; Altman Z-score.

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