Accounting Information Quality And Costs Of Capital Of Listed Firms In Ghana: The Moderating Role Of Audit Quality

Abstract

In the dynamic landscape of corporate finance, the quality of accounting information has emerged as a critical determinant of firms' costs of capital. This study delves into the intricate web of relationships between accounting information quality, capital costs, and the often-overlooked dimension of audit quality within the context of listed firms in Ghana. The study's target population comprised all the listed companies in Ghana and this was based on Ghana Stock Exchange (GSE) annual report for the period of ten (10) years spanning from 2011 to 2022. Purposive sampling technique was used in selecting 10 listed companies for the study. Data for the study were obtained from the audited annual financial reports of the selected firms from GSE. Cost of Debt and cost of equity was used to represent cost of capital, earnings per share and market price per share was used to measure accounting information quality whilst audit quality was represented by audit fees and the BIG 4 auditing firms such as KPMG, Price Waterhouse coopers, Deloitte and Ernst and Young. Panel data regression model was used to elucidate the nexus between accounting information quality, audit quality, and cost of capital. Cohen (1983) hierarchical regression model was subsequently used to establish the moderation analysis. The research established a significant relationship between the quality of accounting information and the costs of capital for listed firms in Ghana. Adding to discoveries of this research, the researcher found that audit quality plays a crucial role in shaping the cost of capital and that audit quality is a critical factor that moderates the relationship between accounting information quality and capital costs. High-quality audits (audits carried out by the BIG4) enhance the credibility of financial statements, reducing information asymmetry and further lowering capital costs. The researcher's recommendations revolve around two primary domains: enhancing accounting information quality and promoting audit quality.