Changes in Accounting Policies and Their Impact on the Cost of Capital: An Analytical Study in the Stock Market

Abstract

The study aims to demonstrate the change in accounting policies and its impact on the cost of capital in Iraqi companies. It seeks to review an important topic, namely, changes in accounting policies, by presenting a conceptual introduction to accounting policies and how they affect financial reports prepared by companies and the cost of capital, as well as the correlation and impact between changes in accounting policies and the cost of capital. The Iraq Stock Exchange was chosen as a sample because it has a mechanism for listing companies from all sectors. All sectors operating in the market were included, with 32 listed companies from seven sectors. The study's timeframe was limited to the financial reports of the sampled companies for the fiscal years 2015-2020 within the spatial limits of the Iraq Stock Exchange. After delving into the practical and theoretical aspects of the study, it was concluded that there is a statistically significant negative relationship between changes in accounting policies and the cost of capital, as increased changes in policies reduce the cost of capital. The study recommends that those responsible for establishing and developing the stock market, as well as relevant academic and professional bodies, study the accounting requirements of that market in general, and the level of disclosure in particular, and work to achieve that. The researcher noted that most studies and seminars dedicated to establishing and developing the stock market focused on its regulatory, legislative, and legal requirements, neglecting its accounting requirements and the need to issue local standards that support and enhance transparency in disclosure for companies listed on the Iraq Stock Exchange