The Effect of Earning Transparency on Debt Costs

Abstract

The earning transparency of accountancy is  among the important topics on accountancy and financial reporting. The earning transparency is one of the main functions of accounting and basic components and its results is a favorite topic for investors, managers, legislators, and standard editors. The transparency has a positive impact on performance of companies and it can help the shareholders’ interests through assessing the liquidity and power of repayment of debts in a trading unit. Past studies mainly have focused on dimension and specific aspect of earning transparency of accountancy and its impact on debt costs is studied in this research. The index of measuring the earning transparency in this study is the rate of shares efficiency and also the debt costs are measured by applying four indices including pyramids of net sales growth, company size, the percentage of its ownership by government. The research hypotheses were tested by applying financial information of 116 accepted firms of Tehran stock exchange from 2006 to 2012. The results of this study show that there is a meaningful relation between the earning transparency and the debt costs.