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An Analysis of the Relationship between Information Asymmetry and Cost of Capital

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  • Hashem Valipour
  • Behzad Dadou

Abstract

The purpose of the present study is to examine the relationship between information asymmetry and cost of capital in firms listed in Tehran stock exchange .to measure information asymmetry , the difference measure between ask price and was used .cost of capital included cost of common stock and cost of debt .to test the research hypotheses. Chow test was used to estimate appropriate models of testing the hypotheses on combined data. The results indicated that information asymmetry has a positive and meaningful correlation with the cost of common stock and cost of debt.

Suggested Citation

  • Hashem Valipour & Behzad Dadou, 2015. "An Analysis of the Relationship between Information Asymmetry and Cost of Capital," International Journal of Empirical Finance, Research Academy of Social Sciences, vol. 4(4), pages 215-227.
    • Handle: RePEc:rss:jnljef:v4i4p2
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