The impact of information asymmetry on the cost of equity capital in the Palestine exchange

Dissertant

Id, Muhammad Yusuf

Thesis advisor

al-Dayah, Wail Hamdi

University

Islamic University

Faculty

Faculty of Commerce

Department

Department of Business Administration

University Country

Palestine (Gaza Strip)

Degree

Master

Degree Date

2015

English Abstract

The purpose of this study is to examine the impact of information asymmetry on the cost of equity capital (COEC).

The study population and sample are the listed companies in Palestine Exchange (PEX) from 2006 to 2013, which are 50 companies.

Hypotheses are tested by using multiple linear regression analysis method, through Stata software, based on extracted high frequency (long term data) trading data from the Palestine Exchange (PEX).

In this study, information asymmetry is measured by the bid–ask spread of companies, while the cost of equity capital is measured by required rate of return which is computed based on closing price.

Five hypotheses are used to test the model of information asymmetry.

In addition, the main argument is that there is positive relationship between information asymmetry (bid-ask spread) and the cost of equity capital.

The results show significant and very weak relationship between information asymmetry, bid-ask spread, and cost of equity capital.

Furthermore, the numbers of trades, trading volume and trades volume have almost the same impact on the COEC due to high multicollinearity among them; they do not have relationship on COEC.

Also, there is no relationship between volatility and COEC.

Finally, the results indicated that PEX is an inefficient market.

Main Subjects

Financial and Accounting Sciences

Topics

• Management
• Finance
• Palestine
• Gaza Strip
• Capital costs

No. of Pages

118

Table of Contents

• APA
• MLA
• AMA

Language

English

Data Type

Arab Theses

Record ID

BIM-685785