Discretionary accruals quality, cost of capital, and diversification

Sebahattin Demirkan, Suresh Radhakrishnan, Oktay Urcan

Research output: Contribution to journalArticlepeer-review


This study examines the discretionary accruals quality of single- and multiple-segment firms. The authors hypothesize and find that the discretionary accruals quality is lower for multiple-segment firms than single-segment firms, and for the same level of discretionary accruals quality, the cost of capital is higher for multiple-segment firms than single-segment firms. These findings suggest that more severe agency problems in multiple-segment firms compared with single-segment firms may lead to poor discretionary accruals quality and agency risk is priced-in as a higher cost of capital.

Original languageEnglish (US)
Pages (from-to)496-526
Number of pages31
JournalJournal of Accounting, Auditing and Finance
Issue number4
StatePublished - Oct 2012
Externally publishedYes


  • agency costs
  • cost of capital
  • discretionary accruals quality
  • diversification discount

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)


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