<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>This study investigates the link between the cost of capital, and both share book values and market prices on Qatari Stock Exchange. The rational of this test suggested that their relationship between the published financial data and decision making as result of complying with transparent disclosure, in capital markets which suggested that this data has lost its value relevance to shareholders. Ohlson (1995) basic equity valuation model applied in this research, which linked to the firm’s equity market value to book values adjusted for abnormal returns. Data used in this study represent all listed firms on Qatari Stock Exchange, to test this assumption for the period from 2010 to 2019. The result indicated a negative correlation among cost of capital and both firms book values and share market prices. Firms bearing higher risks are predicted to earn higher returns. According to the study’s findings, statistical evidence supports the claim that raising the amount of leverage raises the risk for equity shareholders. Because of an increase in leverage results in a higher expected return on investment to compensate equity shareholders for the increased risk.</p>
</abstract>

This study investigates the link between the cost of capital, and both share book values and market prices on Qatari Stock Exchange. The rational of this test suggested that their relationship between the published financial data and decision making as result of complying with transparent disclosure, in capital markets which suggested that this data has lost its value relevance to shareholders. Ohlson (1995) basic equity valuation model applied in this research, which linked to the firm’s equity market value to book values adjusted for abnormal returns. Data used in this study represent all listed firms on Qatari Stock Exchange, to test this assumption for the period from 2010 to 2019. The result indicated a negative correlation among cost of capital and both firms book values and share market prices. Firms bearing higher risks are predicted to earn higher returns. According to the study’s findings, statistical evidence supports the claim that raising the amount of leverage raises the risk for equity shareholders. Because of an increase in leverage results in a higher expected return on investment to compensate equity shareholders for the increased risk.

Correlation between Cost of Capital, Book Values and Shares Prices: Evidence from Qatar Stock Exchange

Financial Markets, Institutions and Risks (FMIR)

This work is licensed under the Creative Commons Attribution 4.0 International License.

This study investigates the link between the cost of capital, and both share book values and market prices on Qatari Stock Exchange. The rational of this test...

Correlation between Cost of Capital, Book Values and Shares Prices: Evidence from Qatar Stock Exchange

Published Online: Oct 29, 2022

Page range: 40 - 48

Received: Jun 16, 2022

Accepted: Aug 18, 2022

DOI: https://doi.org/10.21272/fmir.63.40-48.2022

Keywords
Book Values, Market Prices, Cost of Capital, Value Relevance, Qatar

© 2022 Ibrahim Tahat, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Correlation between Cost of Capital, Book Values and Shares Prices: Evidence from Qatar Stock Exchange

Published Online: Oct 29, 2022

Page range: 40 - 48

Received: Jun 16, 2022

Accepted: Aug 18, 2022

DOI: https://doi.org/10.21272/fmir.63.40-48.2022

KeywordsBook Values, Market Prices, Cost of Capital, Value Relevance, Qatar

© 2022 Ibrahim Tahat, published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
Book Values, Market Prices, Cost of Capital, Value Relevance, Qatar